Major buying Bankrupt/ Distressed Regionals
 

What stops a major from purchasing a regional to get its pilots if one went bankrupt etc. Does the fee for departure contract stop another major from buying one of these airlines for simply its pilots?

I've been thinking about this lately, although perhaps from a different angle. Legacies don't need to purchase an airline to get pilots. Legacies need pilots (especially captains and LCAs) to stay at their feeders. Now maybe an LCC/ULCC could benefit by buying a regional with a lot of pilots not qualified for a legacy. Maybe not.

The problem with buying a regional is likely the FFD contracts with the major. Endeavor, Envoy, PSA, Piedmont, and Horizon are already wholly owned by their respective major. That leaves the mega-regionals (Mesa, Republic, Skywest) that fly for multiple airlines and United's exclusive regionals (GoJet, Commutair, Air Whiskey).

Due to FFD contracts with multiple carriers, I think the mega-regionals are out of the question. United can not own more than 49% of an airline without triggering the F/A scope clause. The wholly owned regionals (DL or AA or AS) could make flow improvements (up to a staple or staple with fences) in order to keep LCA and Captains on the RJs. The question remains, why wait for a flow, when you have a class date elsewhere. If anyone does start handing out seniority numbers to their RJ LCAs or CAs, that causes other problems (harder to recruit OTS, union opposition from mainline, regional union opposition).

Why would any major due that? None are hurting or projected to hurt for applicants.

Or they could just operate the flights themselves... which is what they've been doing. If all the regionals collapse, those flights will just be operated by mainline or not operated if they don't have the resources.

Have you looked at the schedules today? The majors don’t have the trained warm bodies they need to fly their OWN schedules.

So then they simply cancel the flights, like they've been doing. Still, point is, there is no reason for them buy any more regionals than they already own and can't staff either.

They’ll keep getting the milk for free. Never gonna buy the cow. When the cow is dry, and ready to keel over….even then, they aren’t going to buy the cow.

Contract airlines have historically offered value to the major airlines in more ways than price, and organic growth can be a challenge for any business in any field. Assembling Swissport, caterers, air check, Trego-Dugan and MESA to meet at the same time/ same place is a very different kind of growth. The only major that could benefit from stapling a regional is a major that doesn’t have a regional.

Nobody can benefit from stapling a regional and no major is GOING to staple a regional.

They have plenty of warm bodies. They don’t have training capacity to put those bodies in the proper seats after the covid reductions. Most airlines will be caught up however next fall.

Why go through the expense of purchasing an airline just to capture the pilots when they can simply interview and hire the ones they want?

While I tend to agree it won’t happen, I’m not certain. Why are you certain?

Why would they bother buying anyone for pilots when they can pick and choose who they want to hire?

1. There are reasons some regional lifers are regional lifers.
2. They would rather hire ex-military, especially retired ex military, who due to their age will have a lower average wage over the course of their remaining career, already have a pension with offset for inflation, TRICARE for medical coverage, little experience with union negotiating, and have a 20 year history of conformity to the norms of an organization.
3. Their existing pilots would demand expensive concessions on the JCBA to allow it, and certainly flow-down rights in the event of a furlough.
4. It would require a revamping of the training program to operate both airlines under the same certificate. Their training shops are struggling with throughput right now. It would be the worst time in the world to add one or more small Jet types and try to get the FAA to certify the new type - not to mention then having to deal with their existing union on LCA/SLI issues for the new type(s).
5. Why on earth would they want to add another fleet type? They are struggling to deal with the type-swapping caused by early retirements during COVID already.
6. The majors do not - as of yet - actually have a shortage of applicants.

Among others…

Ok I see we are looking at the transaction completely differently, I’d say here would only be one company post transaction. A non-hub and spoke airline would not want a “regional” like you say.

One company after the transaction REQUIRES all of the above to be accomplished, plus DOJ approval and an agreed upon SLI. Given that the SLI might involve the transaction involving McCaskill-Bond to try to avoid a direct staple:

https://www.mondaq.com/unitedstates/...l-bond-statute

the major union is going to do everything they possibly can to stop it from happening. A guy flying 777s has zero interest in allowing himself to be displaced by someone who has been flying CRJ-200s for the last 20 years.

A major also would rather hire those guys on year one pay, rather than whatever longevity they have at Regional X.

Your list happens with any M&A if it was so prohibitive as you say then there would be no M&A which we know is far from the case with airlines. Your point about the SLI law is interesting because there is no precedent with it, we don’t know how it will look when used. So you jumped from no-staples to regional lifers displacing 777 captains, yet the law you posted doesn’t say no-staple and it doesn’t say 777 captains get replaced, it says “fair and equitable”. “Fair and equitable” is very wide, especially if both parties agree.
Again I wouldn’t bet on MESA, RP, OO being bought and integrated, but it could happen.

Why can’t you liquidate the regional in pieces and sell off the labor component in bankruptcy court using the judge to break all the contracts?

Anything COULD happen. But it won’t for the reasons given. And you need to better understand McCaskill Bond. It was expressly designed to prevent stapling, and no stapling has happened since it became law.

Can you point to case law that supports your hypothesis? No. Name staples pre-TWA, I’m genuinely curious. You are saying things you’ve heard others say and I’m okay with that. That law doesn’t mention “staples” irc.

I’ve given you about six reasons this isn’t going to happen and you choose to nitpick one of them? Do some research, then form your own opinion. I have mine.

I could see United bringing some of the 175s they own in house and training United pilots to fly them. At that point it would also make sense to buy some 195s as well. I don’t know if it will happen but it’s getting to the point of making a lot of sense. They might also buy their regionals and do something like AA has done with them to gain management control. Mesa sure could benefit from that. But buy the regional just for the pilots? Tell me you don’t understand the industry without telling me you don’t understand the industry.

Most majors have just gone to great lengths to simplify their fleets and even so, their training departments are struggling to keep up. It’s the domino effect:

Those who retire are generally those with the highest seniority who have gravitated into the equipment that pays the best.this was a huge issue in COVID when they gave out early retirements and they are still paying for it. So you retire an A350 widebody CA. A younger A330 widebody CA bids for that slot. So you have to train him/her. But that leaves an A330 slot open. So some young A320 pilot CA on that. Now he’s gotta be replaced. Every level you add to that is one more type rating and/or upgrade event. Sticking a 175 into the mix just makes it that much worse. And unlike at a regional where everybody getting their initial type is on first year regional pay, most of the ‘domino trainees will be making serious pay based on current longevity and previous aircraft during training.

But it’s not JUST the training events. Add three years of working as a 175 FO to the mix, and everybody goes up three years in seniority and in pay the first 12 years they will be working at the major. That winds up being a huge extra expense for the company. The company won’t buy that and even if they would, the pilots OVER 12 years seniority won’t buy it because they know it’s a zero sum game and paying 175 guys more means they are going to get less.

I’ve heard a rumor that United already has a 175 pay scale in the contract. Maybe no truth to it. And by the way, Mesa is flying 175s to the desert on a weekly basis. So while there are plenty of reasons not to bring them in house, it’s got to be expensive to have those planes, the newest 175s in United’s fleet, sitting mothballed.

It's a tradeoff between maintaining regional service during a pilot shortage, and the economic tipping point of RJ operations. Tradition says that unions are loathe to have ANY captain scale lower than ANY first officer scale, so in most shops the 175 CA scale would need to be $1 more than 777/350 FO scales. That's what hurts the business case. They could pay 175 FO's $30/hr if they're willing to hire CFI's for that.

If they can make the 175's work economically in-house, then they're likely to do so in the near future (50-seaters, no way). That doesn't mean they'll buy and SLI a regional... more likely they'd buy/lease the assets and hire the pilots. They could give preferential hiring to people already qualified in type, but then you have the street captain / seniority friction. More likely they'd make some deal with the union to allow them to hire 175 pilots who would get a short training course (basically indoc, FOM stuff) and would be seat-locked on type for a while.

If 175's don't work economically, they might still do it at a loss for a while just to maintain their regional network. In that case they would eventually transition RJ's back to outsourced FFD operators... just because you have RJ payscales at mainline, doesn't mean that you have to bring all RJ's in house, or keep them in house. As long as scope allowances still exist, the RJ's can always go back where they came from when the time is right.

A major *could* actually in theory buy and SLI an RJ pilot group. As mentioned, MB would prevent a staple but a major could just allow an SLI... the mainline pilots would be apoplectic of course but nothing they can really do. Scope clauses that I'm aware of protect the mainline group from getting screwed, but they don't allow them to screw another pilot group (again MB would prevail on that anyway). But the problem here is that your newly integrated senior RJ pilots would want to use their windfall seniority to bid a bigger airplane so more training churn. Maybe fence off all mainline planes for five years.

I think the more likely scenario is RJ pilots hired under a provision that would seat lock them into the 175 for a while. Depending on the CBA, they might or might not need union concurrence to assign "new hires" to a specific airplane with a seat lock.

no way United would waste mainline salaries on a 75 seat platform

Who has parked what ?

It will no longer be a 75 seat platform. They can add more seats to those fleets if desire if they are brought in-house and flown by mainline pilots…. The E175s flown outside of the mainline seniority list would have to remain a 75 seat platform. If the Union and management can make a deal on rates, the E175s can be brought in-house and have seats added in the spread the increased costs even more so. But you also have to factor in FAs and mx personnel as well will be mainline wages. So more seats would need to be added to offset the increased costs of bringing the E175 in-house.

Rates for anything smaller than a 320/737 would have to be at a minimum comparable to Delta’s A220 rates. A big chunk of new hires come from the military, LCC’s, and regionals from other networks. Any rate less than that would only encourage desirable applicants to accept offers elsewhere.

I’m not sure why some of you guys in here are putting this much effort arguing about mainline taking on RJ’s. NONE of the RJs are economical enough to make it feasible. A 175 burns nearly what an A321 burns and carry’s 115 fewer people. Those planes aren’t built to be flown on mainline pay scales. Also why would a legacy waste money buying a regional for the pilots when they could just cut the contract, watch it go belly up in the water and assume that at least 1/4-1/2 of those pilots are going to be applying to said legacy anyway. RJs need to go down the $hitter where they belong.

Regionals never should have grown to 150+ jet airlines to begin with. It was relaxing scope and allowing jet aircraft that led the regionals’ to massive expansion. Let them suffer their own consequences and fold.

Seriously, are you incapable of doing your own research?


https://www.hsdl.org/?view&did=843131

An excerpt:


https://airlineweekly.com/2022/03/al...of-efficiency/

https://seekingalpha.com/article/436...e-game-changer

https://news.delta.com/deltas-777-ai...-amid-covid-19

If that was true they wouldn’t be pulling routes and replacing other routes or better known as “slots” with RJ’s to begin with. I don’t want to work for a company that operates empty A320’s to replace those RJ routes. That’s because I care for my own job security. If they could replace 5 flights a day with mainline metal from an airport they use two of those slots a day for regional metal, they would have done it already. The only choice would be to give up the slots, and that’s not good for business either, for multiple reasons not just one. Maybe in the end that’s what they end up doing.

I think the idea of taking 175’s and turning them into 90 seaters allowing for some type of B scale could work. You could also replace most of the CRJ routes with the E2’s. Obviously for that to happen it would require buying a regional that actually has assets and bringing it “in house”, removing scope from the conversation. You could sell that move to your shareholders probably, but the problem would be the union. As others have said though, it’s tough to sell the idea of buying out a low cost labor group straight up with assets you already own. That idea of bringing your own WO regional “in house” has never made sense to me, but buying a regional airline with actual assets could work.

The 4 airlines that rely on the regionals for their hub and spoke model could try to go “hybrid” utilizing both the hub and spoke model and spoke to spoke to mitigate the shortage of pilots at the regionals and save some slots in the process, but everyday the regionals are closer to a total collapse and it will never get better for them, only worse. So the “hybrid” model would only work for so long.

United mainline pilots flying 175s? Thanks for the chuckle

It would be 195 E2s or A220s. Not too unrealistic though.

Majors would never purchase a regional for its pilots. It's best to let them fail, close the doors, etc. Majors have been taking over more domestic routes and it will continue. Regionals are slowly going away and will end up being 175's and small. I believe more regionals will shutdown and that is a good thing (more mainline jobs) The economics just aren't there anymore for regionals. The point of regionals was to have cheaper labor, outsourcing 20+ years ago and now times have changed, it makes no sense anymore to have regionals. Regionals will shrink and majors will grow to takeover more and more of the domestic flying. There will always be interview programs such as Aviate and now of course the ULCC's are hiring regional FO's and thats an immediate pay raise right there. Get that A320 type and move on to a legacy or just hangout and be comfy in the right seat of a bus making more as 2nd FO than you did as a regional CA. But, no major will be buying regionals for pilots. Every regional pilot today will have no problem getting hired at a major in the very near future unless you have DUI's, police record, 5 checkride failures.

IF A MAJOR WANTED E2s they could simply buy or lease them, just as some are currently buying/leasing A220s. But with a declining number of pilots in the pipeline, the tendency will be to grow by capacity with A321NEOs and 737MAXs, not opt for smaller aircraft, although their are niches where the smaller aircraft would be helpful for long thin trips. But as of yet, there is no reason to think anybody will ever be buying a regional for its pilots. The regional doesn’t OWN its pilots… it’s a 13th amendment thing.

Not only that, there will be some pilots in the regional pilot group that the major simply doesn’t want. Too many conspicuous piercings or tattoos, too many DUIs, too many training failures, too little education, too sketchy a criminal record or social network postings. They wouldn’t buy the whole group even if they could if it required them to add these people to their seniority lists. Worse yet, these are often the same people they have already rejected multiple times and an SLI would put them in higher positions due to their regional seniority.

No, anyone not hustling, getting hours, getting college completed, getting apps out - you know, the sorts of things that always got you noticed at the next level - and hoping instead that your regional just somehow gets bought up by a major are going to be left behind by the ones who hustle, because it isn’t ever going to happen.

If I put an order in for a 737max, which year would I receive it? Calls on ERJ! The same airline could go to Brazil and order as many E-295s as they want with thousands of regional airline pilots already typed on the aircraft.

The sooner the regional model dies the better, if Delta wants to fly to Escanaba or Williston they can do it, otherwise leave for the Sunnnys or Allegiants.

I don’t think you get it. It’s not like Embraer has e-195s on the shelf in six packs for sale either.

And it doesn’t matter if thousands of regional pilots are Emb -170-190 typed (as am I BTW) because they’d still have to go through the whole training program on the new certificate anyway. I’d grant you that their training risk would be low, but damn few newbies wash out of training at any major anyway. Nor could they restrict the newbies to that aircraft, they would have to use the existing CBA (or a negotiated JCBA) and whatever SLI the mediator decided was appropriate.

Look, it’s clear you are simply ignorant of a lot of this. That’s no crime - we all start there - but you really ought to research the reality a little bit before making hopelessly naive suggestions. Moreover, encouraging yourself and others to count on some fantasy might impair you and others from doing what actually WILL work. This is a time of nearly unparalleled opportunity for anyone with an ATP if they actually work at it, getting the hours and doing the things that historically have worked will let them get to a major more reliably and quicker than in recent history.

Hoping to sort of back your way into a major because they are short of trainers and you have a type they don’t particularly desire (JetBlue is getting rid of their 190s and AA retired theirs a couple years ago https://www.avitrader.com/2020/05/01...ng-767-fleets/) ain’t going to be your path to success at a major and you are ill- informed or foolish to believe otherwise.