American Eagle Envoy Pilots Throw Down the Gauntlet, Try to Call American’s Bluff

The idea of pilot shortages at regional airlines may seem mundane to those of you outside the industry, but this has created some absolutely fascinating situations that will impact every air traveler. Most recently, union leadership at American Eagle Airlines (which I’ll refer to as Envoy here since the name is changing soon), opted not to let its membership vote on a concessionary contract that was stated to be the last and best offer from American’s management. American will now do what it can to shrink Envoy into oblivion, but Envoy pilots are betting American won’t be able to pull it off in light of the lack of pilots around the industry. This is a risky strategy, but it does highlight how things are changing.

Envoy Pilots Call American Airlines Bluff

For years, the regional strategy was the same for most carriers. Mainline airlines looked to a variety of regional carriers to carry passengers for cheaper than they could themselves. Naturally that meant the regional carriers paid lower wages as one way of keeping costs down. That wasn’t a problem because the supply of employees to work at lower wages was seemingly endless. Even the highly-skilled pilot ranks were filled with people willing to do the job on the cheap. And they even paid for their own training, putting them into debt as they worked their way up to the minimum 250 hours required.

Why would the pilots do that? Well, they loved to fly and there was a promise of a better life. With airlines growing, the regionals were an entry point into the sought-after job flying for the mainline carriers. That dream was hit by a truck when the bubble burst in 2000/2001.

Since that time, airlines have shrunk on multiple occasions putting their own pilots on furlough. Meanwhile the pilots at the mainline carriers that remained stopped retiring. See, at the end of 2007, Congress raised the mandatory retirement age for pilots from 60 to 65. So essentially until just about a year ago, no pilots retired. There were a lot more qualified pilots than jobs out there, so the regionals could continue to pay less but those pilots weren’t going anywhere. They were just living on a dream deferred.

On some occasions, regional pilots tried to stand up and demand more. Even if they made short term gains, they were simply marginalized in the long run. The mainline carriers could just move on and pick a different regional. In some cases, that meant the end of the regional entirely. Look at Comair, one of the earliest regionals that succeeded at flying jets for Delta. Its costs were too high, and Delta eventually opted to just shut it down, moving flying elsewhere.

Those regionals with higher costs who failed to bring them down faced certain doom. And that burden usually fell on the employees.

Sometimes the mainline carriers would dangle carrots in front of the employees of their regionals in order to get them to cut wages. US Airways-owned regional PSA was offered 30 more big regional jets if the pilots agreed to concessions just last year. They did. American Eagle pilots were offered more big jets as well if they did the same. They didn’t.

What was the difference in these situations? Just a little bit of time.

I already mentioned how pilots had started retiring again last year, and there are a lot that will be hanging it up in the next few years. That already had people talking about a pilot shortage, but the government kicked it into overdrive with new regulation. In the name of “safety,” they introduced a new rule requiring pilots to have 1,500 hours of experience (or a little less in certain circumstances). That combined with new pilot rest rules that force airlines to hire more pilots to fly their existing schedule means the tables have turned.

Airlines are now struggling to find the pilots they need to fly their schedules at all. Just a few examples that have popped up in the last couple weeks…

And that brings us to Envoy once again. The airline’s pilots were faced with concessions if they wanted to get a bunch of big jet flying from American. The union leadership, seeing all these shortages, refused to even let the pilots vote on the agreement. They shot it down outright.

The way they see it, pilots have leverage for the first time in recent memory because there aren’t enough qualified pilots out there. So they are going out on a limb and refusing to make concessions. In other words, they are trying to call American’s bluff.

For its part, American has said if the pilots didn’t agree to concessions, the airline would slowly but surely move regional flying to other partners. Envoy will eventually cease to exist. The Envoy pilots, however, think that American can’t find any regionals to do the flying, considering how many are short on pilots. They think American will come crawling back. I tend to think they’re overestimating their chances.

American will be looking to pull out some of the 50-seat aircraft in its regional system and those pilots will be able to fly bigger jets. American could make a deal to swap them out and give them a fast track to flying mainline. In addition, this shortage is likely a shorter term issue. It’s hard for a pilot to justify spending a ton of money to get 1,500 hours only to get paid a tiny amount of money once they cross the threshold.

While many speculate that the way to fix the problem is to increase wages, I think another solution is more likely. Instead, the airlines can work on putting together (or partnering with existing) training programs that get pilots through without the massive debt they’d require otherwise. It may take some time before the airlines figure out how this will work, but eventually they will.

Does this mean costs will go up? Yes. Will that make it harder to serve smaller cities? Yep. It just means that the government will have to decide if it wants to pay even more to retain service in these cities or if it will just let it go away.

As for Envoy, the airline is going to try to play its hand at the time when it has the most leverage it will likely ever have. Can’t blame them for trying, but it could mean the beginning of the end for the airline if they haven’t played their cards right.


45 Responses to American Eagle Envoy Pilots Throw Down the Gauntlet, Try to Call American’s Bluff

  1. Xnuiem says:

    I agree the way out of this mess is for the mainline carriers to start partnering with the training shops. European carriers have been doing this for a very long time. Lufthansa and BA both do it. They pay for your training, you get a job, and you are just required to spend a set number of years flying for them. It is actually very similar to how you would go the military way of being a pilot.

  2. Sean S. says:

    The reality is why not? Facing concessions you can either 1) take them, and continue to face subpar wages that you can’t live on or 2) call their bluff and make a run for it and lose a job that isn’t paying your bills anyways. Given those two options most people in a skilled employment position are going to take option #2, because hell, there’s nothing to really lose here. Worst case scenario they all get handed pink slips and simply filter out to other carriers anyways. It’s not as if the overall flying is going to decrease substantially to the amount it did during the recession, and with the increased flight hours requirement, it will take a significant amount of time for a new crop of pilots to come onboard.

    Like you said, the reality is that airlines will have to pony up for training in the future. Delta and Comair used to have it’s own academy, but I believe they spun that off, though I wouldn’t be surprised if Delta wasn’t the first to go back to it. Across the board they seem to be the most willing to just do it themselves when push comes to shove as indicated by the purchase of the Trainer refinery.

    • CF says:

      Sean S – Those may be the options for those at the bottom end of the seniority list, but there are senior pilots making a decent living at Envoy today. If Envoy goes away, they lose all seniority and end up flying for someone else at the bottom of the barrel. That’s a huge deal for the more senior pilots. They might have a job, but it might be a lot worse. That could be made even worse if American gives a pass through opportunity to other carriers that take the big jets. Then these pilots wouldn’t have the opportunity to move up to mainline until others had their chance first.

  3. tharanga says:

    the airlines have finally learned what a pilot’s reservation wage is.
    http://en.wikipedia.org/wiki/Reservation_wage

    Somebody going to med school or law school will put up going into debt because they’ll be able to pay it off afterwards with a high-paying job. Why should somebody go into debt to get their flying hours, only to work for peanuts at a regional for several years?

    How do new pilots in other countries get their hours? Surely they aren’t all doing it on their own dime (or through the military)?

    • Donald says:

      Many ICAO (International Civil Aviation Organization) countries have a Multi Crew Member Commercial Rating. These are pilots who do not meet the requirements of a Full Commercial Rating (This means they are not qualified to be Pilot in Command of an light air-taxi or charter aircraft, but can be a crew member of an airliner. This is how they meet their needs. A recent
      article in Flight International, a researcher related the safety concerns of highly indebted pilots.

      • Do you realize that a person with “Multi Crew” license is just someone trained to babysit the airplane while the REAL pilots are resting ? With a Multi Crew license you can’t even rent a cessna and fly yourself around because they are only trained on how to push the buttons on an autopilot and not how to REALLY FLY. Do you really want to put your kids on an airplane like that and hope that if there’s an emergency the REAL pilots can get to the cockpit in time ????

  4. Eric says:

    The legacies have enjoyed over a decade of cheap feed by playing regionals against each other. L- United was masterful at playing the game and earned the rep as “the black widow of regional partners”. (Go to ATW and ask former long time partner Air Wisconsin…once a wholly UA owned sub). Shifting metal around was easy because there were plenty of pieces on the table and even the most obnoxious RFP would get several takers. Those days are gone….barring a black swan economic/political event, they will not return. The 4 pillars that propped up regionals for 20 years (cheap labor, cheap fuel, new low maintenance aircraft and limitless growth opportunities) have crumbled and that puts skilled labor in the driver seat (no pun intended).

    The shortage is real, it is systemic and will get worse over the next decade. Legacies are not feeling the pinch, yet, but they will in a few years. It is more than a pay issue…it is a QOL issue compounded by the fuzzy math that factors debt > initial return on investment + long term prospects in a notoriously cyclical industry. The European model of recruitment and training might work but lets be realistic: it takes YEARS to go from ground school to 1500 hrs with an ATP.

    I do not think Eaglevoy (and their peers) will completely disappear but they will look totally different in 2019. Wholly owned or indie…everyone will downsize to what they can realistically staff. That means Scottsbluff NE may fall off the aviation grid. It means that weekday frequencies from Big City A to Big City B will go from 15 RJ’s to 4 737/320/717 and 1 or 2 RJs.

    • A says:

      “It means that weekday frequencies from Big City A to Big City B will go from 15 RJ’s to 4 737/320/717 and 1 or 2 RJs.”

      Airlines can always raise fares so demand equals the available pilots but in aviation we have a wonderful option where we can vary the aircraft size to meet demand too. Often I’ve said that back in the 1980’s I flew into small cities in 727’s that today is served by only CRJ’s. The only difference from today is that they had far less frequency. Things worked then and they will work that way again someday. By in large I think we’ve been spoiled with all the frequency and non-stop options that RJ’s offered us, but the party cannot last forever.

    • CF says:

      Eric – I agree with most of what you say, but I don’t think it’ll take years to get more qualified pilots over the 1,500 hour threshold. First, there are guys that aren’t starting from zero. They just need enough hours to get to 1,500 from wherever they are today. Second, there are ways to lower the 1,500 hours to 1,000 by making it a degree program. The airlines could partner with these kinds of places (Embry Riddle?) to create programs that get people in faster.

      • Eric says:

        I was using the University of North Dakota Aviation program’s 2011 report that stated 24-30 months was a realistic timeline from ground school to 1,500/ATP.

        And you are very correct in pointing out that there is a large demographic that falls short of the requirements by ‘a few’ hundred hours. The hard part will be convincing enough of them that the industry has changed and they will not stagnate in regional limbo (40 years old; top of the pay scale 50K a year, living with 10 people based at LGA and seeing their families in Ohio 10 days a month).

        Mando retirements at the legacies (plus FX and UPS) kick into high gear next year (from 1900 to over 3K) and nearly triple by 2020. The numbers increase exponentially from there. If the industry and FAA are going to put an acceptable, cost-effective professional training program together, they need to start NOW. I think we all agree that the top of the pyramid is fine. It is luring people to the pyramid bottom; a negative salary/debt ratio, poor QOL and the promise that “this time things will be different” that fuel the regional crunch.

        Link for retirement projections 2012-2047 for Legacies + UPS/FedEx (WN and LCC’s not included)

        http://s51.photobucket.com/user/bgmann/media/Retirements/mandatoryretirements-1_zpseea7d65b.jpg.html

  5. dan powers says:

    Looks like American Eagle owned by american airlines will come to an end…just like comair owned by Delta died. These 2 airlines will be the martyrs for the rest of the regional industry. The race to the bottom has ended…the remaining commuter airlines will now find out that slave wages will not keep them alive. If they want to stay in business they must pay their pilots a fair wage(not one that qualifies for food stamps)…and charge their Legacy- parent a realistic fees per departure to operate these 50-76 seat regional jets. By the way the FAA public records show over 4000 qualified ATP rated USA born pilots living overseas because they do not want to collect on food stamps .

    • CF says:

      dan powers – I have a lot of problems with the overseas pilot argument. I know ALPA has put this one out there, but the reality is that these are people who simply aren’t going to move back just because wages climb a little. Forgetting about those who aren’t able to come back (maybe they’re older than 65), you have people flying widebodies all over the world from Asia and the Middle East. Are they really going to come back to the US and start flying regional jets if wages climb from $15,000 to $30,000 starting?

      Oh sure, I know there are some people that would come back, but I think the supply is being wildly overestimated.

      • Mike says:

        There are still plenty of pilots overseas that aren’t flying wide bodies that might come back. There are a lot more companies that hire or contract for US pilots besides ME carriers and China…

        • Mark Skinner says:

          Why would they want to come back unless the money is there?

          If the airlines are prepared to pay overseas pilots enough to entice them, why not just pay local pilots more?

          It doesn’t seem at all likely that overseas pilots would take a pay cut to work with a regional outfit. Well, not the ones that you would want up front in any case.

  6. dan powers says:

    once american and usair are fully merged…american eagle will dissapear…replaced by american connection= made up of PSA wholy owned(already recipinet of the CRJ900’s)…and piedmont also wholy owned…air wisconsin will cease to exist. the rest of the flying will be divided among Mr.Bedford, Mr.Ornstein, Mr Kanodia and skywest(which by the way will be fully merged with express jet). piedmont will eventually become and all JET operation as the DHC-8’s get grounded because they approach their 40k hour limits.

    • CF says:

      dan powers – A few thoughts on your points here.

      1) I can’t imagine ExpressJet merging with SkyWest. More likely is ExpressJet just gets shut down and SkyWest takes over some. But a merger? ExpressJet is too much of a mess.

      2) Why bother making Piedmont all jet? You have PSA flying jets just fine for you. Piedmont won’t have a reason to exist if it doesn’t find new props to replace the Dashes that are definitely getting long in the tooth.

      3) As for Air Wisconsin. I think that’s something of a wildcard. If they can provide feed competitively, then they could stay. But it may come to another Comair/American Eagle-style moment for them.

      • Boy Blue says:

        Think they will shut down ExpressJet and let go of its 5000 pilots during a shortage? Doubtful, this is just the beginning of the shortage. Who will do this flying when no one can cover their own flying. This is the largest “regional” in the country. Pilots don’t start over at other regionals, it happens rarely.

  7. Dan says:

    Brett,

    I think you should elaborate on this statement a bit more: “They think American will come crawling back. I tend to think they’re overestimating their chances.”

    The training academy, as you pointed out, may be an option down the road. But, as others say, it’s going to take some time to spin up. I also don’t know what’s a practical number of hours to fly in a day while building up to the 1500 requirement. Assuming they can fly 8 hours a day (which is high in a stressful training environment, although not so bad for traditional line flying), it will still take then 187 flying days to build that time. That’s six months of calendar time, or almost 9 months of “business day only” flying (ie weekends off).

    I think these Envoy guys really have a shot at this, because AA simply has no options to replace them within the next 30 days.

    BTW, training academies aren’t cheap either, and the value proposition gets destroyed if they have to pay the trainees.

    • LT_DT says:

      It the curriculum and training at the academy are rigorous enough, the FAA might conceivably lower the hours required below 1500 for its graduates. I think that this is the case with military pilots. They need fewer than 1500 hours to get a civilian job under the assumption that their training meets rigorous standards and their experience might be more relevant.

    • CF says:

      Dan – Well, think about it this way. In the short term, you have a bunch of 50-seaters still out there. Think PSA would ditch its 50 seaters to get those new E-175s? Yep. Air Wisconsin? Oh yeah, for sure. So if American wants fewer 50-seaters (which it will), then it doesn’t need more pilots in the short term. It just needs to swap out old airplanes. And then if it gets its act together, it could have more pilots coming into the system within a year. Remember, there are plenty of pilots not coming in with 0 hours – they just need to build up from what they have.

      As for training, it’s definitely expensive but you have to figure that if a major airline partners with a school, they could drive a lot of efficiency and bring costs down a lot if they do it en masse.

      • Ted says:

        False, for starters air wis has a better contract and pay than Eagle and are unlikely to take concessions for bigger planes. Seconds, psa only has 35 crj 200s and are already set to receive 30 900s so that replaces almost all of them. Taking on 60 emb 170s would double their fleet and would require them to double their staffing for crappy pay.

  8. Seems like if AA shuts Envoy down even slowly, wouldn’t those out of work pilots want jobs and go to the other regionals AA would start using who would now be hiring more pilots so they in turn would be right back working for AA but at the bottom of the senority list and maybe even making less money?

    These pilots need to remember union leaders work for the union so would not loose their jobs, it’s they the pilots that would so they need to step up and not let outsiders decide their fate.

    • Realist says:

      This is exactly the line of reasoning on which Parker and Kirby are betting.

    • Juan says:

      They rejected because AA regional partners are all paying higher wages than AA offered Envoy.

      • Boy Blue says:

        It won’t work that way, the pilots at Eagle have been there for years and certainly most won’t start over again at year one pay. We have a few Comair pilots at our airline but most of these guys went on to do other things.

  9. jeremy says:

    And this is why Southwest, Jet Blue and Spirit are going to survive. No regional flying, only mainline with mainline pilots. No hub and spokes, just a great route network.

    • SEAN says:

      Technicly Southwest & JetBlue have hubs, but they aren’t at the scale of Delta, American or United. They call them focus cities. Look at BWI, LAS & MDW for Southwest – they function like hubs even if that isn’t the intention. As for JetBlue at JFK, that is a hub no matter what you call it.

    • Realist says:

      Tangential to this thread but of interest would be a discussion regarding how the AA/US merger, if not “saved”, definitely helped SWA out of tight spot. They were getting squeezed by higher operating costs and the resultant inability to distinguish themselves from their competition based on price; labor strains were already showing. Along comes Parker who not only increased new AA’s labor costs by over a half billion dollars annually (and US Airways by ~ 40%) in order to bribe, er I mean “woo”, the pilots, but the merger also will cause fares to increase, giving SWA breathing room on the top line as well. Add to that the slots SWA received at DCA and LGA and clearly this merger helped SWA as much as anyone.

  10. You set out the issues very well, Cranky. I wonder what impact the new tentative contract Republic just worked out with its pilots will have (assuming it’s ratified, of course).

    • CF says:

      DesertGhost – Well, we’ll have to see if it’s ratified first, but I imagine this will drive a need for more pilots. They say improved working conditions are a part of this, so I assume that means a less burdensome flying schedule – more pilots will be needed to fly it. Hard to say more than that at this point. Even hard to say that since I don’t know details.

  11. Austin says:

    Why was Fee for Departure even created? Maybe it should just be eliminated. I like the Allegiant and Spirit model. I think Southwest is veering toward a major mentality which is sad. Allegiant and Spirit PAX may feel like they’re being cheated but they keep coming back so their models have to be working for the present.

    • Dan says:

      Probably for schedule and equipment. I remember back in the day that the regional carriers could sell their own seats, which presumably means they had more say in the scheduling and aircraft fleet planning

    • Fee for departure is mostly about risk shifting. The majors wanted a spoke flown, but it might not’ve made sense depending on how you sliced the revenues in general. The majors got the plane to fly where and when they wanted it to, and the regionals only had to deal with making sure the plane actually flew, not if it sold enough seats to be profitable.

  12. Eric C says:

    So two of United’s major feeds (XJT and CHQ) have pulled down flying, and American is proposing to remedy their own situation by laying off the very pilots to whom they just paid a $7500 signing bonus so that they can go solve United’s staffing woes. Meanwhile both Republic and SkyWest pay *more* to fly the same planes. Where is American going with this?

    There’s a train of thought that says the majors are well aware of the looming pilot shortage and are trying to strong-arm their way into long lasting, low-cost contracts to carry them through it, lest labor gain leverage. Several of the smaller regionals and Endeavor have accepted those concessions. If Eagle had fallen AA would have excellent leverage to force concessions from SkyWest and RAH, too, with added pressure from the forthcoming Delta rate resets.

    It boggles the mind that pilots can be both paid too much to permit their company to survive, and yet also be paid so little that massive signing bonuses are required to attract them. I have no doubt that the long term solution will involve some sort of airline sponsored training, I just fear that it will come as a Faustian bargain.

  13. Ed says:

    While it’s the pilots who think they control this situation, American Eagle have a couple of thousand other other employees in a variety of roles – all doing a fine job. Eagle has done a great job in ground handling other airlines, for example, and it would be a pity to see it suffer. Maybe they’ll spin that off too?

    • Ben says:

      Eagle ground handling is horrible unless you are flying on a plane painted in and operating under an AA codeshare flight. But don’t you worry, that part of the company will continue to exist long after the fate of the flight ops department has been decided.

    • CF says:

      Ed – I don’t see why the ground handling business can’t survive even if the airline doesn’t. Piedmont has the same thing – a fast-growing ground handling business. I don’t know if a spin-off would be necessary. That may just be the only part left standing.

  14. Sean says:

    This faux Craigs List ad seems a pretty accurate depiction of what AA is attempting to extract from the Envoy pilots from my distant perspective: http://dallas.craigslist.org/dal/lbg/4332339424.html

  15. Eagle Pilot says:

    “The Envoy pilots, however, think that American can’t find any regionals to do the flying, considering how many are short on pilots. They think American will come crawling back.”

    I don’t know where you got this idea from; as ALPA has stated we fully expect AA to make good on their promise. You have to understand a little bit about our history – after 9/11 many Eagle pilots were displaced back to the right seat (First Officer) and/or could not upgrade to Captain for many years because of the flow through/flow back program with American. Nobody ever expected that there would be a flow back – whereby furloughed AA pilots occupied the left seat at Eagle. Then came the idea that AMR would “divest us” and send us out on our own. There were no takers, of course, so we remained under the AMR umbrella. This pulled us into bankruptcy and we voluntarily agreed to a concessionary contract not long ago. After the merger AAG announced record profits and then had the gall to ask – no demand – more cuts! Well after all we’ve been through I can tell you that enough is enough. Most of the Eagle pilots today are guaranteed flow through to AA what what do we care if they shut us down? I’ll gladly find a fun flying job for a few years – flying freight, corportate, charter, whatever – and not have to put up with the bullying that we’ve been subjected to. Honestly I don’t know how Doug Parker sleeps at night. In one breath he says “we have $10 billion in the bank” and then he expects his lowest paid employees to accept more cuts. You just can’t make this stuff up! Please, shut this place down and put us out of our misery.

  16. Another Eagle Pilot says:

    As stated above, there is no feeling in the Eagle ALPA union leadership that we can’t be replaced. I was at the meeting, and it was said several times that the “Comair” threat made by mgt (or their hired union buster, actually) is very real and certainly can happen.

    My personal feeling is that enough is enough, and that Mr. Parker is going to do whatever he’s going to do, with or without concessions. I’ve spent 14 years working for subpar wages while subsidizing too low airfares, and I’m done. Either I get hired by a major, flow through to AA, do better here, or leave the industry. I’m not going to voluntarily take another cut, and I’m not going to start over at another regional.

    There are a lot of regional pilots who are survivors of the lost decade, and we’re not going to go further backwards. At some point it’s not worth it.

    • Mark Skinner says:

      Perhaps like many other US trained pilots you might like to consider working overseas?

      Some of the outfits pay reasonably well for experienced people.

  17. Donald says:

    Reply to several points made by the uninformed.
    1. “All those ATP s out there can replace you”. Just holding an ATP doesn’t mean you are qualified.
    Do you hold a current medical? Are they active pilots? Many I suspect were obtained as personal milestones by amateur pilots. I used to reply to a Chief Pilot who would threaten me with all those apps he had on file. Half weren’t qualified. Of the other half, half of them you probably couldn’t contact because they had a job already. So now you are down a quarter of that pile!
    2. New pilots can train to replace current pilots. To meet the new FARs, by going to an approved program will require almost $32 K investment over 4 years (Using Embry Riddle University data). When you are done, you still haven’t been hired. When you are hired, you must start a training cycle
    at the airline that may last 60 days. Then face a year on probation. By the way how is the economy? Going up or going down? Maybe you will get furloughed right out of class, still want to be a pilot?
    3. So they shut the airline down, get another job. Are you typed in right airplane? Pilots can’t usually make a lateral move (ie; Capt from one airline to another. You go back to copilot on smaller plane as a reserve pilot on call). So there you are a the kitchen table looking at the bills, while the wife, kids and
    dog are standing on the other side, wondering when you’ll a “Real” job? Did I mention now you have
    to commute to the new base and rent a crash pad. After long furloughs and the recalls went out, even
    the Major never get all the pilots back. Many make the career move out of aviation.
    4. The industry has a bad image that makes many a would be employee reconsider this career track,
    not just pilots, also flight attendants, mechanics or ground support. If the public and the industry wants professionalism, they must be attractive with desirable pay and working conditions.

    • That is exactly why I left AA. I LOVED going to work at ORD every day as an international CSR. I just couldn’t handle the crap pay and bullying by Crandall and Co along with the January furloughs. My language and customer care skills paid better outside of AA. I’m glad I had a chance at my dream job. AA made it untenable.

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