United Has a Shot at The Regional Flexibility It Craves

At the International Aviation Forecast Summit last week, United President Scott Kirby was unsurprisingly in high demand. After his presentation, he took a few minutes to sit with a handful of media so we could fire questions at him. I asked Scott about “scope relief,” something I wrote about back in March. As always, he wasn’t shy in his response. In fact, Scott said that United is already in negotiations with the pilots on this issue. While I would have thought this was impossible before, I now think there could be an opportunity here.

I realize this needs a little background before we get into Scott’s comments. Airlines have “scope clauses” in their contracts with pilots. These scope clauses limit the number, type, weight, and seat count of aircraft that can be flown by regional providers under the mainline brand. These were demanded by pilots to protect mainline pilot jobs from being outsourced to lower cost providers.

United will tell you it has the most restrictive scope clause of the big three US airlines, but that’s not entirely true. Here’s a comparison:

< 51 Seats 70 Seats 76 Seats
American No
meaningful
limit
Can’t exceed 40% of mainline fleet size
(~380 today)
Delta 102 223
United 102 153
(+70 if United adds a small narrowbody airplane)

So yes, technically United has the most restrictive rules now, but in reality it has the exact same scope clause as Delta. The only difference is that Delta brought 717 aircraft onboard as a mainline aircraft, so it could have 70 more of the 76-seaters. United could bring on either the A220 or the E90/95 family (as noted in the contract), if it wanted to add those 70 additional aircraft itself, but so far it hasn’t done so.

What Scott probably really wants is American’s scope clause, but presumably he’d settle for something in between. After all, United is now trying to grow its mid-continent hubs (Chicago/Denver/Houston) to be more competitive, and part of that requires more regional flying as well. Here’s what Scott said when I asked him about scope relief.

I hate using the term scope relief, but first I’d say I completely understand why our pilots feel the way they do because the way United used scope in the past is to fly markets like Dallas to Chicago, Newark to Atlanta; places that never should have been regional markets. They did not use to fly markets like Denver to Columbia. That is what we’re doing now. The reason scope clauses exist is because pilots want to protect their jobs and don’t want their jobs to be outsourced. They want to grow. The good news is at United we are growing and that’s going to continue. It’s working well and we’re going to grow.

That creates a backdrop where I think we can create, we’ll ultimately be able to get to a deal where our pilots feel good that their careers are not jeopardized by scope and in fact are enhanced by having a competitive scope clause where we fly a competitive number of regional jets. But they’re going to want us to fly them in the right places and they’re gonna want the kind of protections that make sure they know that they’re gonna have career growth opportunities.

A lot there but at the end of the day our interests are aligned, and using regional jets to fly in regional markets to feed the mainline is one of the keys to how we make this airline grow. And it is in the pilots best interest and because of that I think we’ll get to a deal which works for them and for us.

This isn’t particularly new, but what is new is that from what I understand, there is a possibility that a deal will get done. Scott isn’t wrong in what he’s saying about the pilots. They are right to be wary about how regional partners have been used at the airline before, and they do want growth. So how can they come to an agreement?

On the pilot side, the group is putting out videos about what it sees as the two options. Here’s the most relevant one:

Unsurprisingly, the message is “buy A220/E90/E95 aircraft and you can expand your regionals under the current contract or we’ll be happy to fly those 76-seaters for you at mainline.”

The pilots think they have a good case on the latter, especially now that United is taking delivery of Embraer 175s with only 70 seats in them to fit under the cap. The Embraer 175 should probably have about 80 seats onboard, or another row than they have today. The only reason they don’t is because the contracts cap regionals at 76 seats. Seeing these airplanes with only 70 seats on them has to make the pilots salivate. If United has a regional operating the Embraer 175 with 70 seats, then could it really be less economical for United pilots to fly them with 80 seats (or more)?

Knowing that United isn’t going to want to bring that flying back in house, it’s hard to see how there’s a deal to be made along these lines, but this is all public posturing anyway. Look beyond that posturing and you can see where a deal might be made.

As mentioned, United has been growing its mid-continent hubs lately, but a lot of that flying is being done with 50-seaters. And United has a LOT of 50-seaters. As a comparison, Delta’s most recent 10-Q said it had 128 50-seaters flying under its brand. United, from what I can tell, has more than double that at more than 275. That doesn’t include the more than 30 aircraft that Commutair is still adding nor the 20 aircraft that it just signed up ExpressJet to fly. This isn’t ideal since 50-seaters are cramped, more costly per seat, and they don’t have a First Class or Economy Plus offering. United has maxed out its 70- and 76-seaters under the current deal, so if it wants to improve revenue and reduce costs, it either needs to add more mainline or it needs regionals to be able to fly more of the 76-seaters.

United wants to grow, and pilots want growth as well. There may be something here if United can guarantee that growth and offer pilots enhanced job protections. It can also commit to reducing the number of 50-seaters so that pilots can be more comfortable that the new growth will replace smaller, existing aircraft. If United is willing to make those commitments, then might be able to get at least some of the scope relief it seeks.

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28 Responses to United Has a Shot at The Regional Flexibility It Craves

  1. Nick says:

    Jetblue has a few 190s they don’t need… maybe united will take them?

  2. In Scott Kirby’s statement, he mentions Denver to Columbia flying. Is that supposed to be Columbus, OH (CMH), (or is it Columbia University? :-) )

    • Chris says:

      I suspect he was referring to Columbia, South Carolina (CAE).

    • Jason says:

      My guess is COU-Columbia, MO.

      • Brandon says:

        As my home airport I also assume he meant COU. Interesting that he brought up COU-DEN. The city/airport created a revenue guarantee fund to lure United to begin service about one year ago. They tapped the fund for the full amount to cover losses on this route earlier this year so it will be interesting to see if the load factors have increased enough to keep this route going.

    • Kilroy says:

      I hear there’s a good landing spot not far from Columbia University that no other airline is using on a regular basis. Might need seaplanes, though, and I’m sure Sully’s consulting fees aren’t cheap. :-)

  3. HT says:

    Great article. I think my favorite part of your articles are the great pictures that often accompany them (for example, see your March article on scope relief, with the Willy Wonka reference).

  4. Alex Hill says:

    Is negotiating a lower pay tier for mainline pilots to fly 80-seat E175s really completely out of the question? That seems like the real solution to me.

    • CF says:

      Alex – I’d say it’s incredibly unlikely that United would agree to that.

    • Tim Dunn says:

      Alex,
      to add to CF’s accurate response, mainline pilot unions have generally not wanted to reduce salaries for smaller aircraft because it has the potential to pull down all salaries by reducing the “base salary.”

      It is more likely that UA is simply holding out on ordering an NSNB to see what they can get in scope relief for it. The economics of paying a mainline pilot salary support larger aircraft.

      As for the question about upgauging costing some small cities their air service, 50 seat aircraft are not economical now compared to other aircraft. UAL uses as many as they do because they can’t add enough large RJs to replace the 50 seat flying they are doing. And of course a lot of routes can support 110 seat aircraft; UA nearly doubled capacity in the well-discussed Atlanta-Newark market by adding mainline aircraft but they could accomplish the same thing product-wise with a smaller aircraft than the 737-700 or A319 and be able to push up fares in the process.

      and there are still a lot of cities that have a half dozen or more 50 seat flights per day. The larger question is to ask how many cities have less than about 200 seats per day of air service and for those cities, the upgrading from 50 seaters to 76/80 seaters is not going to make a difference. If a city can’t support 200 seats of air service, then there are other issues that are related to air service subsidies which can be debated separately.

    • Mark says:

      The pay rates for small narrow bodies have already been negotiated and are in the current UAL pilot contract. All United needs to do is buy them.

      • Tim Dunn says:

        Mark,
        what are UAL’s rates for the A220 or any Ejet? According to Airline Pilot Central, UAL doesn’t have a rate for those aircraft or at least it is not published on that site. I agree with your post below about concessions. I’m not sure if you consider trading one gain for something else as a concession but that is what most of us think is possible.
        If you don’t think that type of trade is possible, what do you see as the future of UAL’s regional operations and a NSNB?

  5. J Walter says:

    I think Kirby suggested that he’d give restrictions on which markets (by size, like EWR-ATL and DFW-ORD) could see non-mainline flying. I think either CO or UA had such restrictions on hub-to-hub flying.

    • Chris says:

      To me, that seems like the most realistic solution. However, UAL’s fond of using the E175s to LGA for greater frequency which business travelers love. I can’t imagine they can maintain the same frequency with larger aircraft economically. But to your point, it’d be a great compromise. Or they should just buy the A220 which looks like an incredible aircraft.

  6. Tim Dunn says:

    You are right, CF, that relaxing scope is likely to be a hot topic for both DL and UA, which I believe begin negotiating contracts before long. I suspect that adding more seats to the 76 seaters is one goal of the companies (the CRJ-900 can also easily hold 80 seats) but so also is allowing the smallest E2 jets into the US carriers’ fleets which can’t currently be done because they are too heavy.
    UA is behind DL because they have not committed to a NSNB but it really is not likely that they will settle for an 80 seat regional flown by mainline pilots over a 110 seat aircraft. DL, like UA, wants to have regional carrier flown large regional jets. Simply moving those aircraft to mainline and adding 4 seats doesn’t provide much growth plus a 110 seat aircraft provides 30 more seats over an 80 seat large RJ which itself is 30 seats larger than a 50 seater. Given that the economics and remaining life of the 50 seaters are falling quickly, moving 76 seaters to mainline and a rapidly shrinking 50 seat operation leaves regional carriers with just 70 seaters which aren’t that much younger than 50 seaters.
    I strongly suspect that UA will end up adding a bunch of 110 seaters – either the A220 or the E190E2 – in return for the ability to add 4 more seats to the 76 seaters (or, like DL up to 10 seats on the E175s that are capped at 70 seats) and maintain those plus new 76/80 seaters at regional carriers. A fleet of 223 76/80 seaters can do a whole lot of flying and in UA’s case could go a long ways to dramatically cutting its 50 seat operations.

    For UA pilots, it is easy to see a NSNB as a tradeoff to add seats to 76 seaters.
    For DL which already has 120 110 seaters in the 717 plus A220-100 (the part of the order that cannot be converted to the larger – 300), the tradeoff might come as growth of the longhaul international fleet since DL says it wants to grow its international network and also seems to be stretched to add the next new longhaul route.
    Since AA already has very generous 70+ seat scope, it might be more difficult for the company to gain much more without a significantly larger give from the company. Given that American has a fleet plan with nearly zero growth in mainline fleet size, AA pilots undoubtedly would like to change that.

    This is an interesting subject and the resolution of it has significant implications for the US3’s networks in the 2020s and beyond.

  7. NDP says:

    Undoubtedly 70 seaters and larger have a place, and with better performance and range they will open up new opportunities.
    However, the economics of larger aircraft works against those smaller cities that cannot sustain even 2 flights per day.
    We’ve seen many cities and towns loose all commercial service because of the loss of 30 and 40 seaters in the past. The move to these 70+ seaters will again strain the economics of even more routes.
    There is another opportunity here.

    • Chris says:

      Let’s just hope the “opportunity” isn’t more EAS subsidies.

    • Kilroy says:

      I really wish someone would produce a map of the US highlighting areas (and the % of population) not within X driving minutes/miles of a commercial airport offering scheduled flights (optionally, scheduled flights on planes of at least Y seats, or scheduled flights where at least 1 route is >= Z flights per week).

      I understand the argument about smaller towns losing scheduled air service, and I’m very sympathetic with the potential impact the loss/gain of air service has on business and economies, but I doubt whether that much of the population in the lower 48 is farther than, say, a 90-minute drive from an airport with regular air service, even if one excludes 50-seat RJs and airports where the only scheduled air service is on routes that see < 5 flights a week.

      As you alluded to, if there are some significant populations like that, it's an opportunity for someone with the right business plan to target.

      • Jason H says:

        Here’s a map of 100 miles from all United destinations: https://tinyurl.com/ycsmb63p
        Not a good tool for population though, but probably not much.

        • Kilroy says:

          Thanks. Even that has to cover the vast majority of the population of the lower 48. Fill in a few empty spots in Texas, the Southeast, etc with other carriers’ flights to their hubs, especially if you count RJs, and I can’t imagine there would be many gaps, other than perhaps NV and MT/ID, along with portions of the Great Plains states and northern New England.

          • GDC says:

            Not quite all UAL destinations are on that map.

            Missing MAF, LBB, AMA, FCA, GTF, MFR, BHM, BTR, LIT, JAN, SHV, RAP, GCC, MSN as some examples to fill in the gaps. There are others still missing I’m sure.

            but it gets the point across that a vast majority of the American population has access to air service within 100 miles. And that’s just on UAL.

            • Jason H says:

              You’re right (mostly) – the map is of all UA mainline destinations, taken from the Wikipedia page. I unintentionally left out UAX-only airports, but here is another map including them: https://tinyurl.com/y9sp9dh6

            • GDC says:

              Well some of those cities I listed are Mainline destinations. MSN, MFR, FCA, MAF for example. So take Wikipedia information with a grain of salt for accuracy.

  8. JayB says:

    To this UA passenger, regionals may have their place, like hub to/from spokes, but from IAD to DFW, AUS, SAT, MSY, OKC, MCI, and MSP, or DCA to ORD and IAH, on something called “doing business as,” isn’t the place. I expect something called United to be an airline using its own aircraft, manned or crewed by its own people, under an airline code designator “UA,” without further need for disclosure “asterisks” or “star symbols” or any such thing. I’ll let the pilots, the unions and all the many lawyers argue out the “scope clauses,” but I’ve taken the pledge, a “clause” if you will, no buying tickets for “doing business as” operated flights, except where there is no other choice.

    • It depends on the product that each airline offers. In my case, I have a choice between a 737 and an E175 on the route I take most often (the route is ~700 miles). I actually prefer the E175 because there is no middle seat and the coach seats are wider than a 737. So, it’s a much better passenger experience IMO. Additionally, if you do get upgraded to F, there are 4 seats that are both aisle and window.

  9. Mark says:

    I absolutely guarantee that there will be no concessions on scope by United pilots. It’s not going to happen.

  10. One possible solution for all carriers could be to relax the restrictions on the size of outsourced aircraft in exchange for flying fewer of them.

    If the scope limit was raised to 100 seats, a airline could, in theory, exchange two 50 seaters (CRJ-200 or E-145) for one 95 seater (E-190) flown at its regional operation. This would probably have to be tied to an increase in the number of small aircraft flown at the mainline, both to keep overall employment close to current levels, and to be able to adequately cover the schedule.

    The airlines could be given greater flexibility below 85 seats, taking the capacities of the CRJ-900, E-175 as mentioned in the article, and possible E-175 E2s into consideration. The number of aircraft between 85 and 100 seats flown by regional partners could be tied to the number of small mainline aircraft. It seems Delta has already done this to some extent, so this really isn’t a new idea, just an expanded version of what Delta has. The size of the overall regional fleet could also be restricted in a similar manner (tied to the overall mainline narrowbody count, for example). With the right mix, overall capacity would stay relatively flat or could grow at a rate that wouldn’t cause Wall Street to panic.

    A plan like this, using fewer, larger regional aircraft in exchange for adding more small mainline aircraft, such as the E-195, A220-100/300, 737-7 or A319, would outsource fewer jobs and create more mainline jobs – a win for both sides. It would not only address the pilot shortage and air traffic congestion issues, but would also be in line with the overall trend to upguage airline fleets, which reduces unit costs (which are quite a bit higher at the regional level).

    I acknowledge that this approach could be impractical for a number of reasons; some I haven’t thought of, and some I have. The only loses would be in schedule frequency and service to smaller areas, which may happen anyway.

  11. steve says:

    In so many of these articles, it seems like the A220 is a real game changer, and a people pleaser with a 3-2 coach seating arrangement. So why couldn’t Bombardier sell the thing? I for one cant wait for B6 and Delta to get these going. Seems to me United ought to buy just about as many as they can afford, while the discount is steepest and delivery time shortest, as long as high/hot performance is not an issue for western markets.

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