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.

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…

• Great Lakes shut down its Minneapolis hub because it couldn’t find enough pilots
• United blamed the timing of its Cleveland hub pulldown on not having enough regional aircraft available
• ExpressJet told United it had to reduce its flying due to lack of pilots
• Republic announced it would stop flying 27 aircraft for United and American because it didn’t have enough pilots
• Silver announced it would drop its Cleveland routes and stop flying its Beech 1900s due to lack of pilots

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.