It used to be that Republic was one of the shining stars in the regional world. These days, however, that doesn’t say much. Regionals all over are having trouble getting enough pilots to fly their airplanes, and Republic is far from immune. In fact, it appears to be having more trouble than most. Republic says the reason it can’t get enough pilots is a combination of new federal rules making it tougher to become a pilot and the fact that it can’t get a new contract for its pilots. It seems to me that’s not the whole story.
Late on Friday a couple weeks back (the first clue this would not be good news), Republic put out preliminary second quarter results and, surprise, they weren’t good. There’s been some upheaval since with the CFO announcing he’d leave the airline to “pursue other interests.” The problem? Well among other things (or so the release says), the airline flew 4 percent less than expected due to “the ongoing operational disruption caused by regulatory changes and further intensified by our ongoing pilot labor dispute.”
Ah yes, the ongoing labor dispute. This is one of the craziest stalemates in labor today. The contract with the pilots became amendable in late 2007. Just let that soak in. That’s almost 8 years ago. Let me put it another way. This round of negotiations started when Northwest was still an independent airline.
After 8 years, is a deal likely? Heck no. It doesn’t seem like either side is willing to come anywhere near each other. The company noted in the press release that the pilot union had put out “unrealistic and unsustainable demands.” That doesn’t sound like anything that’s going to get resolved soon. We probably have to wait for the slow federal mediation process to run its course. A strike may very well happen… someday. The only savior here would be new management or new union leadership that decided to budge on their respective positions.
Of course, in the airline industry, contracts never expire. Republic says that’s the problem here. It considers the current contract to be below market and it wants to pay more to get more pilots onboard. But the union wants more than Republic is willing to give so everybody loses. If Republic can’t find new pilots, then it has no choice but to shrink. The only problem is, it can’t shrink enough.
Republic had planned on retiring its 50-seat ERJ-145 fleet in 2016, but then Delta decided to extend its contract for 38 of those ERJs by another 5 years. This was a complete surprise, but Delta had the ability to extend it without Republic’s input. Now Republic is stuck flying those airplanes and it doesn’t have the pilots to do it.
So Republic desperately needs those pilots. Why is this coming to head now? We’ve talked about this before. This wouldn’t be an issue if it weren’t for the federal regulatory change
known as FAR 117. As the airline mentioned in its release, the federal change that now requires pilots to have 1,500 hours (up from 250) of experience before they can fly commercially has created a shortage. When that rule went into effect, even those capable pilots who could have been able to fly before were no longer allowed until they got a whole bunch more hours.
Needing 1,500 hours means pilots have to spend a lot more time getting paid very little to build up time. The ultimate goal of flying a big jet may not seem nearly as nice as it once did because of how much time and money has to go into the process. The end result for a pilot, of course, is the payoff of a good job that pays well. Only Republic (and most regional) doesn’t pay well enough, it thinks.
If Republic raised wages, does that solve the problem? Eh, partially. It helps the airline to steal more pilots from other airlines, and it helps make it more attractive than other regionals to new pilots coming into the field. But ultimately pilots don’t want to be at Republic (or any regional) in order to have a career. They want Republic to be a stepping stone. And they want to get off that stone and on to the next one quickly.
A shrinking airline isn’t going to help pilots to move through quickly, but without enough pilots, Republic can’t grow. Sure, pay is a part of it but there’s more to it than that. This is not the best situation for anyone.