Excargodog

"We can't raise aircrew wages, the company would go broke/become noncompetitive." Says regional management.

But seriously, how big a proportion of total costs are aircrew wages? They are, in fact, a relatively small portion of total costs. Let's consider one cost that most people don't even think about - the cost of capital.

Capital cost can be thought of as - well, opportunity cost really. What does it cost me just to OWN that piece of equipment? That can be a difficult question to nail down with precision, but decent estimates are pretty easy to make.

An Embraer-175 lists for $40 million, but I doubt anyone actually spends that much for one. Advertised prices are deeply discounted, especially for quantity buys. Republic just agreed to buy 100 of them and I'd be surprised if they paid a whole lot more than $30 million a unit, so that's a pretty good approximation of the cost of one. Even so, Republic didn't just write a check for $3 Billion to Embraer. Almost certainly they financed the purchase, either by getting loans or by selling bonds. So OK, how much does THAT cost? Well, that varies by industry, but there are people who keep track of that.

Cost of Capital

For the airline transport industry, currently, the cost of capital is about 6% annually.

What that means is that the $30 million E-175 sitting out on the ramp is costing the company about $1.8 million a year - just to sit there. Now during that year, the aircraft will probably fly about 5000 hours, basically a thousand hours each for every five FOs and five Captains.

It's weighted average cost of capital (WACC) is going to be about $1,800,000 annually or right at $360 a flight hour. Even if the crew is making $150 a flight hour ($100 for the captain and $50 for the FO), the contribution of the crew salaries to the cost of a flying hour is not even near the capital cost.

And capital cost per hour is sort of trivial in comparison to per hour costs of capital amortization, fuel, maintenance, insurance, gate fees, etc.

Yes, aircrew salaries ARE an expense item, but don't let anyone kid you that they are the major driver in the balance sheet at least unless they are too LOW.

Because if you can't fill those two seats up front, you sure can't fill any if the seats that actually generate revenue to pay any of those other expenses and some of those costs, like WACC, go on even if the aircraft is just sitting.

LRSRanger

Imagine raising ticket prices by one dollar per seat, per leg. Inconsequential in the grand scheme of things but would sure attract pilots. Poof, no more staffing crises.

Blackhawk

Ahh yes. The economically ignorant excuse to raise the price of XYZ.
The truth is that airline fairs are pretty inelastic. Airfare search engines list prices in order, and yes an $1 difference in tickets can make a difference.
Perhaps the higher cost of aircrews can be sustained by higher airfares, but that isn’t the call of regional management anyway. Even WOs don’t control their ticket prices, though they may have more input. Other FFDs have almost no input in ticket prices. They compete against each other and yes, ever penny counts and can make a difference between winning a contract and getting more flying and losing a contract and seeing flat growth or a decrease in flying. That results in long upgrades which... well, how do long upgrade times play in the regional industry? New hires don’t give a crap about contracts and pay. They care about upgrade time:

Excargodog

Judging by the number of regionals paying fat bonuses for direct entry captains,they care more about QOL and living in base, actually.

Fleet Warp

Aircrew wages account for less then 1-2% of all operating costs, but it's pretty much the only operating cost they can possibly control.

-tangent-
An coal miner was leading a donkey into a dangerous tunnel that was closed until the engineers reinforced it. The foreman saw and began yelling at the miner, telling him he was putting the animals life in danger, and asking him why he was so stupid. The union rep muttered that the coal miner was also putting himself in danger too. The foreman replied, "Who cares? I can hire another worker, but I have to buy another donkey!" -true story.

rickair7777

Regionals exist for one purpose only: To control labor costs. Other costs are not really relevant.

Gonna whine to mainline about wanting a bigger piece of the pie? They'll just transfer your flying to someone who will do it for less.

Gonna complain to the mainline union (might even be the same union you have)? A bigger piece for you means a smaller piece for them...

It's not about what's fair or what's possible, it's about money: Specifically, as little for you as possible.

Don't like the reality? Two choices:

1) Get Out (either to mainline or some other job).
2) Form a national regional union. You might get a little more, but if you get carried away, they'll just shut the regionals down and bring it in house. Regionals which don't do it for less have no reason to exist.

Fixnem2Flyinem

Or option number 3..

Grab some popcorn and sit back and watch the regional industry implode in a few years once they realize these bonuses and flow programs to spirit and frontier are bandaids with limited adhesion.

rickair7777

Majors don't care. They'll drop service to Podunk Falls (since 100 seats is about the minimum size they'll consider at mainline), and put narrowbodies (fewer of them) on fatter routes.

Congress might care, so those 50-seaters might end up doing subsidized EAS under "Brand X" instead of "mainline express".

SonicFlyer

So its the unions fault for letting them get away with it?

Fleet Warp

I think he is saying its the pilots fault for needing a place to start out, and getting stuck there for 1-2 decades while mainline relaxed scope a little at a time to increase their own pay short shortsightedly at the expense of their jobs and advancement opportunity. There is a reason why regionals are f scale. f = **** those guys