The Slow Death of the Multi-Carrier Regional
 

As the airline industry has evolved over the last decade, we are seeing the trend of mainline airlines bringing their regional feed in-house once again. (Or as in-house as legally possible aka United)

American: Envoy, PSA, Peidmont
Delta: Endeavor
United: ExpressJet, CommutAir

Will we begin to see the slow death of the multi-carrier regional airline, such as Republic and SkyWest? Delta is rumored to be going to 3 regional carriers and United is now investing heavily in ExpressJet. Thoughts?

I guess you missed the news about GoJet and United.....


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United isn't investing heavily in XJT. They invested a small portion to have a little "ownership", but otherwise doesn't give a rats a$$ about any regional.

There is zero evidence that it’s trending this way. Who are the other two carriers delta is going to keep? Republic and Skywest.

It will always go to the cheapest bidder. Mainline will let their regionals reach near death and then they’ll make a move like we saw today with gojets. They’ll take from one and give to the other. This is how it will always be.

Contracts are mostly not going to the lowest bidder these days. It's going to whomever has the best performance at a price both parties can live with.

That’s not true. Republic should’ve been awarded delivery of the 25 175SC order then over ExpressJet if that were the case. Yet, instead, United gave it to an airline that was cancelling multiple flights per day due to lack of crews.

Trying to understand/predict the machinations mainline with the information available to your average line pilot is an exercise in insanity. There has to be an incredible along of backroom dealing going on.

It does seem there is going to be conslidation in the regionals. I think the "pilot shortage" is overblown. Flight schools are having no issue filling slots as pay has increased. That being said there is definitely a dicotomy between top tier regionals and the less desirable being able to fill classes. There will be consolidation to the bigger regionals that can garuntee mainline carriers they can staff their operations. As for Republic, they only operate the most desired equipment (E170/175's) and little known fact all of the big three have ownership in Republic. I have to think they are likely to be a survivor, and gain additional flying in the long run. Lastly, with classes essentially filled for the remainder of the year Republic can prove they can get enough pilots. Obviously, they are part of UAL's long term plans, but there was a post on LinkedIn from XJT advertising interviewing people this month for Feb. 2018 classes!

The trend is each major will have one or more WO or partially owned that are obviously single carrier. Plus two triple carrier mega regionals in Sky/Rep. Finally the remaining ones - all three TSA holdings, plus Mesa and Whiskey I think will be the wild card. They may trend to single carrier (mostly with UA), merge, or die. Hard to tell. Whiskey and GoJet were saved at the bell - so just when you think you have it figured out, you don’t.

So I’d say the trend is that there will be three catagories of regional. WO/Partial; Multi-Carrier mega regionals; and Other.

You are taking about an ExpressJet cattier that Skywest was slowly killing. Now that they are from underneath Skywest, I definitely see them improving from here on out.


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They own as much as they legally can.

Spent $70M, at least 25 EJETs (rumored 60), $27k bonus, and they now make 50 cents on every dollar of profit at XJT. I think they care.

It is definitely looking better for the multi-carrier Regional then it did a few months ago. Any thoughts/rumors that the Majors were looking to squash off some of the smaller Regionals and consolidate were quickly put to an end with the new deals Mesa, Expressjet, and GoJet just got. Now can we put an end this silly nonsense which is just as ridiculous as thinking there is any sort of pilot shortage out there.

Good math.
When express jet was losing money per departure, how much the profit was United making? 100%.

Lol there will be no death to the ‘multi-carrier regional.’ On the contrary as history shows WO’s are the first to go. The pilots ask for more, management doesn’t want to pay out so they say bye bye. Comair come to mind?

United doesn’t have any controlling stake in any regionals. Although they want to so they can jump on the ‘flow’ bandwagon like AA and cut more costs, but fortunately their FA contract prevents this. Their management is clearly out in left-field, since the whole point of regionals is performance, then cost savings. Their decisions are evidently based on cost savings only. Maybe learn from Delta if they’re trying to re-shape their strategy for ‘customer satisfaction’? But, time will tell how many mis-connects and cancellations these sub-par regionals will give them, leading to any cost savings at all...

Not too sure about this considering they’re still scrambling looking for pilots. Yet there are a lot of guys out there still accepting CJO’s from OO and YX with extended waits for class dates. But, we shall see this summer.

How much of that 100% does UA get to keep making, because hey it's still FFD? 100%.

If UA/Man/whatever turns XJT around, then United gets to keep 100% plus 50% of whatever profit on top of that, according to your math.

This!

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Yes.

WO's serve as "capacity accumulators"... majors can use them to quickly downsize (or possibly increase) regional flying as and if needed. The downside/risk of a WO is that the camel gets it's nose under the tent and starts thinking it's part of the family and deserves mainline compensation... that is mitigated with maintaining outside, competitive, sources of regional flying, and if necessary liquidation ala comair.

The independent regionals tend to own their own aircraft, which saves the major the financial burden of ownership but also requires longer-term fixed contracts to incentivize the regional to buy planes... nobody is going to incur a 20-year mortgage/lease obligation to acquire 50 planes for a three-year contract. OO for example typically likes 10-15 year contracts, with 15-20 year mortgages. They will incur some "tail risk" at the end of a contract, but not much more than five years.

The "multi-carrier" aspect is key here... OO for example knows with multiple major partners it can probably find homes for tail risk planes if they are not renewed by the original partner... this has played out numerous times. Essentially the big multi-carrier regionals serve as shared RJ pools for the legacies.

The same 'family' bought a regional out of bankruptcy and gave them the highest rj pay rates in history.

The entire regional industry is being squeezed by high labor rates, bad PR, expensive oil, slot constrained airports and aging airplanes.

I dont think mainline wants all WO. They want to have a race to the bottom for contract price.

That worked in the last decade or two, with the retirement rate in the future, whipsawing will be the last thing on money hugging managers minds. I’ll put a round of cold beers on WO’d being the only surviving regionals by 2028...

You may think I’m crazy by saying that, but the numbers don’t lie. By 2028, the number of retirements will be plus 10,000 than the number of regional pilots in the game today. By 2032 plus 20,000.

Dang if you can tell me what this industry will be like in 10 years I'll buy you the whole brewery. My guess all the way out at 10 years is that there will only be 2 legacies, and neither will have regionals. They'll all be in house. The smallest airplane in the fleet being the smaller c-series or equivalent.

Edit: I take that back, that's a dumb prediction they're still building RJ's

Ha that’s true, I can’t honestly say what will happen next month let alone by 2028. But, if I were a betting man...

By 2028, the US military will have retired or separated an additional 25,000 military pilots aged from 33 to 48. The airlines love these guys for a variety of reasons including relatively low medical costs since many have Tricare, a known long history where it would have been particularly difficult to conceal problems from their employer, and the simple fact that the average cost per flying year for someone you hire at age 40 is considerably less than that to hire a 25 rear old who would then wind up spending 28 years at the pay of a senior captain.

Don’t get me wrong, the retirement wave means better times are coming, but at the major level it’s still a buyers market, and those buyers are going to buy the cheapest pilots that can do the job.

Yea that's a pretty sad reality. The good news for us is that the military is beginning to hold onto their guys/gals better, but they can't possibly compete with private sector pay. There will always be military hires, but the percentages are moving in our favor when you look at new hire demographics at mainline.

Another thing to consider is airlines are growing, and large airplanes like the 747 and a380 are going out of style. Smaller airplanes doing longer and more frequent routes help

Hey I said just a cold round of beers, not betting my first born on it... :)

Anything can happen in 10 years. However, currently there are no trends in this industry that coincide with your statement. Everything is playing out the same way it has decades ago. Future retirements will not force all regionals to consolidate to WO’s.....

So in 2009, when regionals were paying 20k and Great Lakes had 100’s of resumes on file, how is that the same as now? Right now regionals are throwing bonuses at new hires causing their pay to be higher than captains at some places. Most are begging for pilots that can upgrade at almost street CA rates... A lot has changed since 2009 and a lot will change by 2028. I’m not saying it WILL happen, I’m just willing to bet that it will. We all know we’re just one recession or war away from stagnation, but it won’t be as bad as regionals having 12 year FO’s again. Therefore IF the economy stays out of hot water, yes regionals like GoJet, Compass, Republic and even SkyWest will be hurting by then. Again, just my opinion, or maybe a hopeful outlook as I despise the regional blood sucking model that has been created.

I think we can all agree we would like to see all flying come back in-house. But, if you “despise the regional blood sucking model,” a “hopeful outlook” would not be one that turns all regionals to WO’s. This would be the absolute worst case structure for pilots.

Reference [MENTION=2246]rickair7777[/MENTION]’s post.

Look man, I'm no Skywest fanboy and am looking to make an exit ASAP, but they have a brilliant management group. They will definitely be one of the last players in the game.

UA purchasing part of XJT. The. Awarding GoJet 50 aircraft is proof enough that contract airlines will be around for a long time...

SkyWest is up to almost 5000 pilots, correct? I know that at least 2500 of those pilots were hired in the last 4-5 years. All of which want to move on. In 2021 and beyond major retirements crest over 2500 a year combined and a few years with over 3000. Now even if only 20% of those pilot come from SkyWest in the next 5 years that is half of the current seniority list. Again who knows what will happen, but we have never seen numbers like this in the industry. I’m telling you, in 5 years regional management will not know what to do if these projections hold true. But... I have been called crazy before. I will say SkyWest may be one of the last ones standing, but it won’t be the juggernaut it is today

GoJet is literally begging for street CA’s and the majors just started the upwards trend in retirements. You’re telling me a few vacuum years from the majors and they will be around still? I like Modelo Negra, with a lime 😜

Maybe I’m just a glass half full guy but it won’t hurt my feelings to see all regionals flounder in the next decade due to staffing issues. Including the one I’m at. Regionals shouldn’t have gotten this big anyway, all the 175’s fly a majority of routes that mainline carriers fly during peak times. That’s what we regional pilots are now, fill ins for long thin routes so management can test the waters cheap, on the backs of hard working guys and gals making a 1/3 of the pay.

Edit : Please don’t take that as me not caring about the senior regional pilots, because I do. In fact I care so much I hate the fact that right now people are topped out at 1/3 the rate of other pilots flying the same routes, in and out of the same airports providing a “streamline” experience for the passengers

Hiring between 120 and 140/month. I'm not sure how long they can sustain that but I never thought we'd attain the kind of growth we have in the 5 years I've been here. They haven't even started using the signing bonuses we handed them in the last pay agreement. I think they will continue to surprise everyone. I think most of us would love to see more jobs move to mainline but the greed at the top in undeniable.