Relax, step away from your pizza, and check your blood sugar fatdaddy. If you read my previous posts, I said I understood his logic.

 

I didn't say it was complex math, I said it was a complex problem.
It's full of all sorts of variables, and those variables are essential to the answer you came up with. And in the end, with all those variables (frequency, empty seats, schedule for connections, etc.) maybe it isn't less than half, but it's close.

 

Regionals exist because there was a time in the not to distant past where regional prices were rock bottom cheap. However over the last couple years significant pay raises, improvements in work rules, retention and new hire bonuses, and the signing of new CPA contracts with the majors has closed that gap.

There will be a time where the cost benefit of a regional will not be there and I believe we are approaching that point. When the major has to buy the regional, raise the employees pay, provide bonuses and THEN pay for the upper management structure and the CPA it quickly becomes cost prohibitive.

I don't know what those numbers are but I have a strong feeling that United, with this negotiated contract due in 2019, will become the first legacy to fly a 76 seat aircraft (or whatever they decide to configure the current 76 seat jets to). It will be a trial run that will either succeed or fail. If it succeeds CPAs will not be renewed and the aircraft will be brought in house as the current CPAs expire. If it fails the old scope section will come back into play.

Regionals are bloated and expensive on every level and the experiment that started in the mid 90's is coming to an end.

 

You don’t understand how airlines work.

 

Thanks MOP! I hope you're right!

 

Then please enlighten us old wise one.
Kirby wants to play wack a mole with the ULCCs and he is gonna drive UAL/CAL holdings into the ground doing it. He ain't gonna do it with main line A319s or 737s either. He has plans to use 70-100 seat RJs. It is a one trick pony that won't work this time. The problem is Frontier and Spirit can make money on a $20 ticket. UAL, XJET, MESA and Air Whisky cannot. Period.
Pass the popcorn this is gonna be one helluva train wreck.

 

How much money F9 and NK can make on $20 fares remains to be seen. Well see where NK and F9 come in with oil going up so much this year. We will also have to wait and see how the new contracts goes, pay is going WAY up. NK may have no choice but to raise ticket prices. When they do that they cut the very people they rely on to run an airline, the super price sensitive, the people who will NEVER be able to afford to fly anyone but the ULCCs.

The passenger that are price sensitive but willing to pay a little more ($20) for a better experience will pick one of the legacies. It remains to be seen how a ULCC will fair in a high oil competitive market place. NK reported last quarter that basic economy has affected their numbers already. Can an airline that posts sub 100mil profits every quarter survive with current business practices?

It is very possible United will crash and burn. Its also possible NK and F9 will be forced to shrink or possibly merge and become leaner or even reorganize.

 

I agree. Regionals have a major pilot shortage today with no end in sight. Far less potiential new civilian pilots are entering the career path due to the poor regional wages and career stagnation in transitioning from regionals to the legacies as a whole post 9/11. Today there is no pilot shortage at the legacies, but in 5 to 10 years there will most likely be a true pilot shortage at the legacies. The military has a pilot shortage and that too will get worse during the next decade.

China is growing with projections of over 200,000 new pilot positions to be created in the next 20 to 25 years. A year or two ago I used to get sent brochures from recruiters to fly a 737 in China for 300K per year as a CA. Now I’m getting one from an airline offering just shy of 500K per year for CA’s and just under 300K per year for FO’s. This is only going to go up over time. The ME3 pay low today and if they want to retain pilots their going to have to significantly raise their pilot pay.

Barring a 9/11 type of chatistriohic event we are looking at a true global pilot shortage in the not to distant future.

How can legacies make sure the 70/76 seat RJ’s are appropriately staffed and find a way to increase significantly new young pilots entering the career path? By bringing over time the vast majority of 70/76 flying to mainline and having that be the entry level position for a new hire legacy pilot job. If poriential new pilots saw a real career path in a reasonable timeline to a legacy, far more would choose a pilot as a career and reverse the huge negative trend of young people choosing not to be a pilot as a career.

50 seaters are going away. No ones making new ones, they are too expensive to operate. Passengers dislike them. If fuel hadn’t dropped so much over the past five years many would have been parked today. As fuel creeps up you’ll start to hear more about them going away again. The only reason SK has increased them at UAL is due to the Scope choke and that’s the only way he can add connectivity from the smaller markets into our hubs at present. He wants to grow our hubs, 50 seaters are only a very short term solution.

Yes 70/76 seaters provide a far better customer experience vs. the 50 seaters. I believe they are here to stay at least medium term. Kirby wants more, the only way he’s going to get them is by starting to bring them to mainline (at least the pilot jobs) at an appropriate pay rate.

 

There’s a very big difference between ‘pay rates’ and the actual ‘cost’ of the pilot group. Major airline pilots have far superior work rules than regional pilots which will increase the pay gap between major and regional significantly. In the end, the actual cost of regional pilot groups might indeed be less than half. I don’t have numbers, just speculating.

 

For what it's worth I spoke directly with Chairman Insler. All I can say is that bringing RJ's in house is most definitely on the table, and people in ALPA are thinking way "outside the box."