Could regionals grow while majors shrink
 

Everyone keeps saying that the regionals are at death's door. Esspecially with the looming retirements, that the regionals will be drained of pilots to staff the majors, and the negotiating of contracts will put the flying back with the big boys.

But what if the opposite happens. I just read that AA's new contract allows for regional partners to fly bigger equipment. What if as the Majors become starved for pilots (high paid pilots), instead of moving heaven and earth to scrape them from every nook and cranny they just downsize and farm out more and more flying to larger regional aircraft, and lower paid crews?

I'm not saying this is good, obviously this is a doomsday scenario for our career! But it would make more sense economically if you're a profit driven corporation (not meant to sound derogatory, just realistic) Doesn't the trend in business these days seem to favor outsourcing and not the opposite?

Wait... let me get some popcorn.

Love it!!! :)

Capt. Tony....Do you have the salt shaker?....

I highly recommend that you take some time to peruse these forums and read just a couple of the threads before posting something like this. I'm going to take a wild guess and say you are either very new to the industry or very young.

Everyone be nice now . . . .

Ohhhh this is gonna be good.......I'm sitting down, beer in hand, let it begin....

Hmm? Not sure what that is supposed to mean. I was just presenting a hypothesis that concerns me and wanted to get other people's thoughts on the matter.

I recently transitioned to a different aircraft and there was a lot of talk in GS about the looming shortage, and the coming "draining" and even "shutdown" of the regionals to staff the age 65 hiring requirements, etc. People have all kinds of theories right?

I recently watched the documentary series "The Men Who Built America" on the History Channel and it was a bit of an eye opener for me as to the way business men really think, and I started thinking - what if the pervasive thinking among all my GS peers is wrong, what if the opposite were to happen?

No I'm not young, or new, I wish I was. 9 years 121 and 42 years old. If this APC forums is not a place to have a discussion like this - ok. But it might have been easier if you just shared your thoughts on the matter - even briefly - than to scold me.

How does one respond to this....I guess you don't.

Actually - I take that back - you didn't scold me (I mistook your words) But I'd still have rather had your thoughts instead of the advise:)

Then you should know what scope clauses are.

WHY? What am I missing? Forget about the topic, can you just tell me why it can't even be responded to?

I'm honestly in the dark here guys. Is it too of an emotional topic to even broach? What?

I understand it isn't as simple as I laid it out, but sometimes things can be deconstructed to a few simple common denominators, just to facilitate discussion? No?

Of course I know what they are. Are they always bullet proof?

You didn't misinterpret that I'm advocating for this did you?

Might you be talking about:

C. SCOPE

D. Scope Exception: Commuter Air Carriers and Commuter Aircraft at Non-owned Air Carriers

1. Commuter Air Carriers, Non-owned Air Carriers that operate Commuter
Aircraft, and Section 1 Limitations.

a. The Company or an Affiliate may create, acquire, maintain an equity
position in, enter into franchise type agreements with, and/or codeshare
with a Commuter Air Carrier, and flying by any such Commuter Air Carrier
shall not be subject to the limitations of Section 1.C. above, so long as any
such Commuter Air Carrier operates in accordance with the limitations set
forth in this Section 1.D.

b. The Company may codeshare with and/or enter into franchise type
agreements with non-owned Air Carriers that operate both (a) Commuter
Aircraft and (b) aircraft that are not Commuter Aircraft.with respect to
Commuter Aircraft operated by such non-owned Air Carriers and so long as
any such Commuter Aircraft are operated in accordance with the limitations
set forth in this Section 1.D.

c. The term “franchise type agreement” includes any agreement or
arrangement with an Air Carrier that permits (i) that Air Carrier to use on
Commuter Aircraft the Company name, trademarks, trade name, logo,
livery (as provided in Section 1.F.1) and/or service marks and/or (ii) other
joint marketing actions permitted as a matter of past practice under the
“franchise type agreements” provision of Section 1.D.1.a and including
linked frequent flyer programs.

Hang in there Sulkair. Eventually someone will come on here and post a reply worth reading.
If I were a greedy fat cat in a suit, I would be playing with the idea of an airline sponsored flight training program. Example, someone with a PPL and a college degree gets his flight training paid in exchange for a 5 year pro-rated contract at a crappy regional. This isn't a new idea by the way. Easy Jet in europe pay for the pilots type rating, then deduct the cost from their monthly paycheck.
This would solve the problem of regionals struggling to find pilots and would solve the problem of pilots trying to get into this career but can't get financing.
I would expect the mastermind of a plan like this to charge a high interest rate and pay himself a nice bonus for his efforts.

Like you, I am not advocating this idea or trying to stir up a hornets nest. I'm sure someone on here will get their panties in a wad and nominate me for the tool of the day award. (Yawn)

Bozo,

Actually this is what I read:

It also establishes new work rules requiring more flight time for pilots and freezes their pension. And it allows American’s regional airline partners to fly bigger planes, an issue that has long been a sticking point in labor talks.

11th Paragraph of this article: http://www.nytimes.com/2012/12/08/bu...ewanted=1&_r=1

If a were a fat cat in a suit, I would take advantage of the fact that most major airline pilot are senior and facing retirement, line their pockets with a little more cash during contract negotiations and watch them sell out scope bigtime. I think the OP has legitimate concerns and that is a real possibility in the future.

You'll have to wait until Monday - I hold the award for the whole weekend I think.

For a long while, the "small jet" line in the sand was 50 seats. Then, 70 seats were surrendered.

Then came post-9/11 bankruptcy for the legacies where scope was partially sold, partially taken. If you throw out the unique United/Air Wisconsin B146 situation, Airways allowing CRJ-900s was the first big hit to scope but it wasn't until Delta allowed 76 seaters that things REALLY took off.

DALPA's post-bankruptcy contracts have become the defacto "industry standard" with regard to scope; you can see the impact that had on the recently ratified 1113 contract for AA and the UAL/CAL TA currently under vote.

Basically, 76 seats is now the industry-standard "line in the sand" regarding "large small jet" scope, with the exception of Airways flying some 86 (I think?) seat CR9s and E175s.

The DALPA contract, APA contract as well as the UAL/CAL TA tie the number of "large small jets" to mainline fleet size. In order to add large small jets, the number of mainline planes has to go up.

Of course, throw in another force majeure event like 9/11 and the scope restrictions could go out the window...

The magic 8 ball answer to your question is "outlook good"

Mainline contracts are allowing larger RJs, but at the same time, reducing the total number of RJs in relation to mainline jets. Regionals can only grow if mainline grows.

I will jump into the oven here!!

To answer your question-Yes.They can
Should they is tricky.

While a regional may grow and get bigger equipment,thus allowing a legacy to shrink,it opens the door to players the legacy carrier cannot control.
The VX and JB and Spirits and Southwests (or someone newer)will jump on a vacuum from the legacy carriers.
When these LCCs go the extra mile and develop codeshare agreements with foreign airlines then the nicely planned dreams of senior legacy airline mgmt gets shot down fast.

The regionals will always be in competition to the bottom as they try to get contracts with the legacy carriers.As the pilot population at these carriers gets senior and costs go up,they have a harder time cutting costs.

So can regional lift grow at the expense of mainline flying? Of course yes.
Is it a good plan?--Looks good on paper,but reality may be different.
Do I think legacy carriers are going to try this for a a bit more? yes I do.

Right now we have not felt the full effects of legacy consolidation.
NWA-DAL
UAL-CAL
US-AA is coming
then the mergers between the LCCs will start. I can see a JB VX merge which will make some really profound changes in the industry.
İn the end we will have 3 legacy-2 large LCCs, and regionals used to move bodies.
The ideas of these mergers-synergy etc-all hide the fundamental goal of controlling capacity and controlling ticket price/yield.Too much regional lift negates the yield goal. Supply and demand.

Just my 02 ...and FYI,I am usually wrong.Just ask my wife.

Look at this little regional airplane....Where is this company now?

Photos: Huff-Daland D-49 Aircraft Pictures | Airliners.net

Here they are with a bigger plane.....

http://www.airliners.net/photo/Huff-...636b0c1cc523aa

The legendary Chief Pilot T.P. "Pre" Ball told us that he lost a coin-flip with Charlie Dolson, and therefore had to settle for the bottom seniority number as a Delta new-hire. The number was 12.

Sadly it's just a matter of time before another airline goes bankrupt and Mr. CEO goes to the bankruptcy judge to have the RJ CAP thrown out.

You might want to click on your own links. ;)

Ooops....Meant this one...

Photos: Douglas DC-3-G202A Aircraft Pictures | Airliners.net

Us damn regional pilots can't do anything right.....

How long did it take for NWA to go BK? Delta? United? American? I'd say it could be a very long time before it happens again. It took a very long time to happen initially. You're now looking at a lot of Legacy airlines with little to no pension debt(which was a huge amount of BK debt).

Look at this regional airlines route map.....

Google Image Result for http://blog.delta.com/wp-content/uploads/1954-dl-cs-map.jpg

With all the regional pilots out there, do you honestly think the Majors will become starved for pilots? I think many regional pilots are starving to leave their regional for a major. The pay stinks so bad that FOs will bail ASAP. Even CAs can have a better QOL by leaving. With Delta & UAL(TA approval pending) paying $60+ an hour first year, they'll already be making more money.

What I think will happen is the majors will have plenty of applicants, & the regionals will have problems staffing their planes. Between attrition at the majors level, & the new FTDT regs and min time requirements for a 121 job, the regionals will be in trouble. It's already resulting in massive drops in enrollment in aviation programs, as well as applicants being turned away from regional FO jobs because they won't meet the 1500 hr rule in time.

So in short, while your scenario is possible, I don't think it's likely for the reasons I listed.

Nail on the HEAD!!! ^^^ This

Short, sweet and accurate...

In answer to your question, because this is an interesting question- I think it depends. I think it is tied to three factors. Scope policy's at airlines, Pilot Compensation, and aircraft being manufactured.

Scope policy has obvious ramifications. At Delta the total pie for Regional Aircraft will shrink from roughly 550 Regional aircraft down to 450 total shells. At American with their new Contract we expect them to go from 270 Regional Aircraft up to 320 or so in the next couple of years, maybe higher if their domestic fleet increases. If United's TA passes they might see a small rise in RJ's to bring their fleet up to 120% of mainline block hours. Otherwise fleet totals for United would stay about the same, unless they were to order a new narrow-body aircraft. So with Scope we might see a small reduction in Total regional flying initially.

Pilot Compensation's effect is a little less noticeable. If market forces drive Pilot compensation at Regionals high enough we could see many of the Major's choose to do the larger Regional flying themselves. I think there is no coincidence that almost all of the new CRJ 900's that Delta has ordered in the last 5 years have been wholly owned, giving them more control over aircraft placement. This factor really depends on whether Student Pilots are still willing to work for 19-35 thousand a year for 4-5 years after investing 80-220,000 $. If students are willing to accept the ultra low rate of return then this factor is a non event.

Currently there are no <50 seat Jets being manufactured or even on the drawing board, this is perhaps the biggest threat to the Regionals. On top of this no one is manufacturing small turbo props. With Regionals stuck between a fairly solid cap at 76 seats at the major partners (with specific aircraft limits) and disappearing hardware at the bottom end, they are left with a very small and shrinking business niche.

These three factors place the Regional's in a precarious position. A position that has caused some level of desperation amongst management teams in the past few years, ie bidding for flying below cost to live another day etc. These moves have not gone well for obvious reasons. Skywest INC probably stands in best position of all the Regional's to absorb the most Regional capacity as the total Regional pie stagnates or shrinks. This is primarily due to economies of Scale, flexibility, a seasoned/reliable product, opportunity discipline(trying to take only flying that would be profitable), allowing them to remain competitive while still compensating in a way that will be leading in the Regional industry. These factors make them the best insulated of the Regional's, but not immune to these problems.

It is likely a couple of Regional airlines will grow, while many will shrink or disappear. Mostly due to these factors and how regional airline management teams have been and will handle them in the future.

Quiz time: What airline corporation has the world's largest fleet of aircraft?

I agree, bankruptcy days are over for the legacies, they have shed the legacy costs that drove them there. But I also think the aircraft are getting bigger and newer which may shrink the mainlines a bit more over the next 5 years. For example, the 717/MD90's are obviously place holders till the next gen planes have the bugs worked out.

I agree. And let's not forget about all the LCCs that sit somewhere between a regional and major - Spirit, Virgin America, JetBlue, and Allegiant. These airlines are full of well qualified guys with thousands of hours of jet PIC, and a huge number are going to be flocking to the majors given the chance.

Guys keep talking about the day when the big boys won't want 1000tpic anymore, but I think that day is a loooong way away.

Skywest Inc, with 727 aircraft, operates the world's largest fleet

Oh snap....

Winner....Chicken for dinner...

Not bad for just a "regional".....

I see the point you're making, but lets note that the NWA, DAL, and AA bankruptcies were all shams. They filed bk with billions of dollars of cash and assets on hand. It was solely done to "shed legacy costs" (drop pensions and slash union contracts), and "reorganize the airline". Delta could easily be taken back into bankruptcy if it suited their business plan. And also let's not forget about "forced manure". All it takes is a war event hitting a little too close to home.

How many of those are inefficient 50 seaters the majors want to retire?