I know this is going to come as a shock to you, but I’m writing a post about United and it doesn’t involve dead or misplaced animals. Instead, let’s talk about something that is actually way more emotional… if you’re a pilot. You’ll remember United’s growth strategy that was unveiled in its most recent earnings call. Now the airline is publicly saying what many knew all along. This strategy is intertwined with the ability for the airline to get scope relief. This sounds a bit strange since United has the ability to influence this issue today, but it’s greedy and wants more. It sounds like United is doing its best impression of Veruca Salt here.
American, Delta, and United all have pretty substantial outsourcing operations when it comes to aircraft under 100 seats. You’ve likely flown on one of these outsourced partners, the ones branded American Eagle, Delta Connection, and United Express. In the early days, the airlines outsourced freely, but they also generally focused on small props in small cities that didn’t really interest mainline employees. In the 1990s, the regional jet came out, and then bigger regional jets became more popular in the 2000s. All of a sudden, outsourcing became contentious. Airlines liked to use regional partners, because they could do the flying for less money. And on a small airplane with fewer seats, that made a big difference. It also hurt mainline jobs. The pilots at the mainline airlines were powerless to do much when the airlines could continue to flail and point to red ink. Once things stabilized, however, the pilots fought back.
Enter the importance of what’s called the “scope clause.” This clause in pilot contracts is the biggest limiter in determining how many airplanes can be outsourced to regional partners. These scope clauses used to be all over the map, but over time, the big three have seen the details converge. Basically, the airlines are allowed to outsource aircraft with 76 seats or fewer, and there are numbers limiting how many of the larger 70/76 seat jets can be flown. There is some nuance here, but I’m going to simplify to get my point across. Here’s how the big three stack up in terms of what they can do.
|< 51 Seats||70 Seats||76 Seats|
|Can’t exceed 40% of mainline fleet size
(+70 if United adds a small narrowbody airplane)
As you can see, American’s number is a moving target, and the airline has more flexibility than the other two at this point. But you can also see that Delta and United are basically identical. The one difference? When Delta brought on all those 717s as new mainline aircraft, the agreement allowed the airline to also add 70 new 76-seaters to the regional fleet. United can do that too, but it has, on multiple occasions, declined to bring smaller airplanes into the mainline fleet.
So, if United wanted to get scope relief, shouldn’t it just buy a C-Series or Embraer E2 fleet and get those extra 70 regionals onboard? You’d think. And there are rumors that the airline is once again interested, but apparently even that wouldn’t be enough. Nevermind that Delta is outperforming everyone with the exact same scope clause United has. United wants to cherry-pick. It wants Delta’s profits but American’s scope clause, and the airline is getting more vocal about it.
It’s been reported that at the J.P. Morgan Aviation, Transportation and Industrials Conference last week, President Scott Kirby discussed the issue.
Speaking Tuesday at the JP Morgan transportation conference, Kirby said he is intent on “driving higher connectivity and revenue quality” by providing more capacity from cities such as Columbia Mo., and Rochester Minn. to United hubs. Such routes can only be efficiently served by 76-seat regional jets, he said.
“This is how we will grow the mainline,” Kirby said. But “we have [fewer] 76-seat aircraft than American Airlines. If we’re trying to fly a 50-seat product to Rochester, and competitors are flying 76 seaters into Minneapolis or Chicago, we will lose that battle.”
Kirby said adding 76-seaters is a “win-win” because feeding the mainline creates better opportunities for mainline pilots, but he noted, “I get why our pilots are really nervous about this – if I were a pilot, I’d be really nervous about it.”
And that is the piece of the strategy that didn’t come out initially, but it was always an underlying theme. Right now, United is building up these small markets on the back of 50-seat jets, because that’s what it can fly. But those aren’t going to work in the long run. You would think that if United ordered 100-seat airplanes for its mainline fleet and then added 70 of the 76-seat regionals, that would be enough, but apparently it’s not. He clearly wants American’s scope clause at United.
To that I say… good luck. Pilots value scope, mostly because they know the airlines value it as well. It’s a bargaining chip. When Delta came to the agreement to add more 76-seat jets, it had to give the pilots a lot: a brand new fleet of 717s (and soon, C-Series aircraft). The pilots at United aren’t going to simply give scope relief because Kirby says the plan will lead to more mainline growth. Even putting growth plans in writing won’t help. Pilots have been burned before by plans that just get thrown in the trash can when the next downturn arrives. I know the industry is supposed to be different now, but you won’t find a labor group that’s willing to make that bet just yet.
Were I United, I’d focus on adding a small mainline jet and then getting big regionals first. If that’s done and the airline can make a coherent pitch on why it needs more, then it can try to figure out a way to negotiate it. That, however, is going to be very difficult.