PSA and Another American Regional Boost Pay to Combat the Expected Pilot Shortage

It looks like the regional airline fight to hire enough pilots continues. Two of American’s wholly-owned regionals, Envoy and PSA, have announced they’re boosting starting pilot pay a ton in order to attract pilots. After years of never having to worry about finding someone to fly an airplane for cheap, these airlines (and other regionals) are having to pay up. Today we’ll look more closely at PSA.

More Money Happy Pilots

This PSA has no connection to Pacific Southwest Airlines, the PSA with smiling aircraft that was Southwest’s inspiration. Although, I guess that’s not technically true. See, the original PSA was acquired by USAir in the 1980s and promptly run into the ground. (It was well on its way before the acquisition, but USAir finished the job.) This all happened around the same time that USAir acquired Piedmont in the South. With that acquisition came a couple wholly-owned regionals called Henson and Jetstream.

By the early 1990s, USAir wasn’t using the names Piedmont and PSA anymore, but it didn’t want anyone else to use them either. It had to find a creative way to keep them going, so it looked at the regionals. It changed Henson’s name to Piedmont, and Jetstream became PSA. So while there is a tenuous connection, these are really entirely different airlines. The ownership of PSA has passed along through mergers, and now, American owns it outright.

The modern incarnation of this PSA began in 2003 when it started taking delivery of regional jets. Over the next couple years, it took delivery of 35 CRJ-200s and 14 CRJ-700s for a total fleet of 49 slogging around the East Coast. This was pretty much steady-state for a decade.

During that time, getting pilots to fly was easy. There was a huge glut of pilots in the market, in fact. The multiple economic shocks that crippled the industry since 2000 meant furlough lists were long and pilots who were flying were just happy to have a job. Wages were low, because they could be.

Over the last few years, however, things have changed. Airlines started growing again and pilots were called back from furlough until there were none left to recall. There had been a five-year break on retirements because the feds had raised that maximum age from 60 to 65. Once those pilots reached 65, they started being forced out rapidly. The cherry on top? The misguided federal rule change that required (with some exceptions) 1,500 hours of experience before a pilot could be hired to fly commercially sealed the deal. All of a sudden, the market for pilots was turned on its head.

In this environment, finding new pilots was going to be hard for PSA anyway, but then American made a decision. It wanted PSA to do more flying, and so it started piling on airplanes. First PSA received a contract to fly 30 CRJ-900s for the airline. Then another 24 were added. At the same time, American moved 12 CRJ-700s over from Envoy to PSA. The airline that had been comfortably flying 49 airplanes now finds itself with 115 in the fleet. And that’s not all. Starting next year, it’ll take another 35 CRJ-700s from Envoy giving it a total fleet of 150. And it needs a lot of pilots to fly those airplanes.

Though the big guys haven’t been hurt by pilot issues, because they’ve long been at the top of the food chain, the regionals felt the pain. Republic struggled to fly its schedule. Other airlines had to get more aggressive.

At American’s wholly-owned regionals, including PSA, there was a clear advantage. They had a deal where the pilots were able to flow through to American once they had some experience and slots opened up. There was a clear path to making hundreds of thousands of dollars flying big airplanes to far away places. But that alone wasn’t enough. Some have tried hiring bonuses, others have invested in training, and some are just boosting wages.

PSA is increasing pay for incoming First Officers by more than 50 percent. Previously they made $24.62 per hour in their first year, but now they’ll make $38.50. Assuming an 80-hour month, that means annual pay rises from $23,635 to $36,960. Oh, and there is a signing bonus of $15,000 plus another $5,000 for pilots that have CRJ experience. Yeah, that’s a ton of money for a first year pilot, especially since wages didn’t even always crack the poverty line in years’ past.

Wages in the second and third year will rise too, but that’s it. Why? Because PSA expects that by the third year, First Officers will be able to upgrade to Captain. Captain pay isn’t changing, but a third year captain makes about $69 per hour, or again assuming an 80-hour month, $66,240 a year.

But wait, there’s more. First Officers can get a $20,000 retention bonus that gets paid out in installments after the first year. And Captains get a $7,500 retention bonus. Just because PSA gets them in the door doesn’t mean it’s confident it can keep them there.

What’s interesting is that this is coming from American itself. Envoy has rolled out a similar increase. American may own these regionals, but that doesn’t mean it gives them priority. These subsidiaries have to compete with third-parties, and if they can’t be cost-competitive, they could lose out. Then again, if they don’t have pilots, they will definitely lose out.

The fact that American is making this big increase suggests that either a) the wholly-owned regionals have a cost advantage than can absorb this and still be competitive or more likely, b) American realizes it needs more pilots and it has to start boosting costs across the board for regional flying. This is going to be the new norm.

In the near term, this means costs of operating regionals will go up. That might make some existing flights unprofitable and service could be cut. But the alternative is to not have enough pilots, in which case service will definitely be cut. There is no happy ending for marginal markets.

In the long, we need to hope that increased pay will be one component that helps encourages more people to start training to fly. We’ll need a lot more pilots in the future, and pay is only going to be part of the equation, at best, in ensuring there are enough of them.

[J-Air Bombardier CRJ-200ER via contri/CC BY-SA 2.0]

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26 Comments on "PSA and Another American Regional Boost Pay to Combat the Expected Pilot Shortage"

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SirWired
Guest

Whenever some industry group says there is a “shortage” of such-and-such profession, more often than not, what they REALLY mean is “There is a shortage of so-and-so’s at the salaries we’d prefer to pay.”

Now, certainly things are a little different for highly-trained professionals (vs. the “shortage” of long-haul truck drivers,) but I think it’s safe to say that with pay so low before (despite the long and expensive training required), there was/is no shortage of pilots, and that if pay levels go up, qualified pilots will appear out of the proverbial woodwork.

A
Guest
I work in a completely different field but we’ve been going through a shortage of talent the past couple years, i.e. hiring “qualified” people has been particularly difficult and wages have risen as a result. That said the universities have been graduating record amounts of people with the requisite degrees. Problem has been that with every market downturn the industry sheds thousands of jobs where many go into different fields never to return. As for pilots I suspect similar has happened, $66k/year isn’t phenomenal pay. I know many people with a random undergrad spending far less on their education can… Read more »
Kilroy
Guest
The “shortage” of over-the-road (long haul) truckers is largely driven by the same factors as the pilot shortage. Sure, it’s easier to become a trucker (a few months and $5-10k on a trucking school), but the pay sucks (truckers are lucky to make much above $30-35k their first year, and on an hourly basis @ 70 hours per week, they often make close to or less than minimum wage), and the quality of life is worse than just about any other profession out there (including RJ pilots). When quality of life sucks, and when pay is maybe 1 or 2… Read more »
Dan
Guest
I do analytics work in aviation, and many of my coworkers (including me) have pilots licenses. The company also pays reasonably well, $100k/yr is the low end of salary range for anybody with a few years experience. Never mind that this is more or less a 9-5 gig with nights, holidays, and weekends off. One of my coworkers was a furloughed United pilot, who went back to UA at Year 12 FO pay. $160/hr? Not bad. Another decided he really, really had to be a commercial pilot,and got hired on at one of the regionals at $36/hr. To your point,… Read more »
Harrying
Guest

Pilots don’t fly 2,000 hours a year. ?

Nick Barnard
Member

They’re only paid while the doors are closed, so all of time before and after the flight doesn’t factor into the “number of hours worked” but pilots work more than that number.

Kilroy
Guest

If you read the pilot web sites, most get guaranteed 70-80ish hours a month, so roughly 1000 hours a year. Again, though, that is “doors closed”, and the actual hours they work (sitting in airports, checking the planes, etc) is far more.

Charlie Brown
Member

Limited to 1,000 a year by regulations.

Tim Dunn
Member
The real root of these increases is that American is growing its regional carrier network instead of shrinking it as Delta and United are doing. American has yet to rationalize its network post merger and is also making up for the limits on large RJs that American had for years. These increases will push up regional carrier costs throughout the industry. As long as the higher labor costs are sustainable, this trend will continue but the long term result will likely be that flights will have to shift to mainline aircraft where higher labor costs are more sustainable. Larger aircraft… Read more »
Charlie Brown
Member

American started the whole crap pay in the 70s with the “B” scale. It came back to bite them in the butt.

Horizion used to CHARGE for sitting in the right seat.

Joey Jaidee
Guest

You pay crap wages for something that takes time and money and thejobbecomes less attractive. Who knew???

Kilroy
Guest

You mean there is a chance that RJ pilots may no longer qualify for food stamps? What is this world coming to? /sarcasm

I have always been surprised that the pilot unions (are there any for RJ pilots?) never took the pay issue to the public. When I mention to other pax on a RJ that the guys up front are lucky to be making $30k or $40k, they are aghast.

Finally, as an aside, CLT’s setup for RJs is pretty bad. Heck of a slog from the RJ terminal over to the mainline terminals for those connecting.

grichard
Guest

What an appallingly unattractive career path. Huge educational costs, a period of starvation-level wages, all with the *hope* that your calendar will align with the industry cycle and let you build enough seniority for high pay in the last phase of your career.

It’s an instructive comparison to my own field, medicine: Huge educational costs, check. Pay-your-dues period of low wages, check. But after that, things stay *predictable*. Your salary is tied the the field you choose and the lifestyle you’ll accept. No quasi-lottery with seniority numbers.

Congratulations to the RJ pilots. Long overdue.

David Wood
Member
So sorry I missed Dorkfest this year. Hope it went well. One thing especially caught my attention in todays’s post: “Although, I guess that’s not technically true. See, the original PSA was acquired by USAir in the 1980s and promptly run into the ground. (It was well on its way before the acquisition, but USAir finished the job.)” I recall PSA was in pretty good shape or had Southwest started to eat their lunch? Maybe you can expand on that in a new post. You couldn’t be more right on US Air running PSA into the ground. How do you… Read more »
jaybru
Member
No question, pilot pay is important, well, sort of. When I fly on any pilot’s plane, regional or a major airline, the pilot has my life in his or her hands and I hope the pilot is happy and satisfied with pay. Having said that, If the pilot is flying for a regional under someone’s else name, don’t look to me to support you in any of this pilot pay stuff. I fly as a major’s customer, and I pay the major. Any problems you have with a principal or your own company is your own problem. As a customer,… Read more »
Oliver
Guest

When you book a flight, the airline operating the flight should be specified before you fork over your money. I think that is a DOT requirement,

> I have no dealings with the regional and I am
> not a direct stakeholder in your problem.

The passengers on that CO-branded Colgan flight (CO 3407) that crashed on the way to Buffalo certainly were stakeholders.

plane doc
Guest
Uuugh wait what!?!?!? IF and i mean IF you book any flight on any of the majors there will be flight number along with an operator below next to or within the vicinity of that flight number you book. the operators are there!!! BUT if your eyes are only focused just ONLY of the cost then of course you will miss it like 80% of most folks out here. The DOT has no business telling airlines what to how to contact there flights and how much they shouldn’t or should spend the government already screwed up by forcing all part… Read more »
Mike
Guest

I don’t see this as a long term pay boost for any of them. The second the next downturn begins, and they can fill their training classes, they’ll cut the pay and race back down to the bottom.

Jonathan Reed
Guest
Any one who has run a business knows that you need to pay well to attract and retain top talent. As an airline passenger I want the pilot flying my plane to value his/her job a lot and not take the attitude, that it is a crap job that he or she might be better off losing. I want the airline personnel department looking over pilot applications to be impressed by the quality of the applicants, not feeling that they have to take applicants that aren’t so great to fill quotas. This is really one job where you want the… Read more »
plane doc
Guest
Well now i hate to say but this type of thinking of paying employees well provide good service and make the employees feel apart of the company is not the idea or trend that senior management sees when it comes to running an airline. Besides the shareholders customers and all the chain of command when it comes to importance starts with the airplane. Then later the cost is revolved in its operations (and others) and so on last is the employees what ever is left they have to make due. If the airlines can sub contract there pilots to a… Read more »
Matt D
Guest
What is this relentless fixation with the whole “paying your dues” thing anyway? Suffering just for the sake of suffering? Because “you” had to means the next one should too? That never ending cycle needs to be laid to rest once and for all. NOBODY repeat NOBODY-regardless of profession “deserves” or should “have to” endure hardship just because “it’s always been that way” provided they put in an honest day of work. Re: the original PSA. Agreed. Had they not been bought out, the Recession of 1990/1991 almost surely would’ve finished them off, making them a 4th casualty of ’91.… Read more »
Charlie Brown
Member

I agree with all of your statements. They should have gone to the 737.
South West is the ONLY carrier I will fly with today, and I am a retired 737 pilot.

steve
Guest
Jonathan – what a sanctimonious pile of crap. To paraphrase a highly successful lawyer friend of mine with actual business acumen, “doctors and lawyers are some of the worst businesspeople you’ll ever run into”. You’re in a business where you don’t have to pick up the phone, business comes to you if you have any reputation or network at all. You get to sit on your high horse and give people advice and, gathering from your comment, yours is of the ivory tower variety, not real-world. Your cost of goods is long since paid for and your margins are astronomical.… Read more »
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