For pilots who came up through the regional world in the 1990s and 2000s, the news must have been a shock. Envoy and Piedmont, two of American’s wholly-owned regional airlines, are now paying first year first officers the same as American mainline… for the next couple years at least. It wasn’t long ago that some regional pilots might qualify for food stamps. Now, it’s a very different world. What isn’t clear is where this road will lead the industry, but upheaval is likely.
Both Envoy and Piedmont announced the deals, and I had the chance to speak both Piedmont’s VP of Flight Operations Steve Keefer and Envoy’s VP of Flight Operations Ric Wilson to get more information. A quick word of warning: The pay rates at both carriers under these deals appear to be effectively the same, but I’m not sure if the contracts are completely identical. I will be talking about this as if they are.
First year first officers will get $90 per hour through August 31, 2024, up from $51 previously. (This includes a 50 percent bonus that will expire that day, but it’s still higher than what was being paid before.)
Pilots need 1,000 hours in the right seat before they can become captains, so for someone with no right seat time, that’ll take 2-3 years. But now, once a first officer hits 750 hours, they will start getting paid captain wages at that point anyway as part of this agreement. And what does that mean? A second year captain or almost-captain will now pull down $150 per hour, or close to $150,000. This comes with some work rule improvements as well.
This is such a good deal that it took two days between the time that Piedmont proposed the deal and when ALPA agreed to it. These contracts were not open for negotiation. The airlines are simply desperate for pilots.
We’ve been hearing about pilot shortages for some time. The legacies have not had any issues filling their cockpits, but that’s because they could easily steal from their regionals. The regionals have been bleeding badly, and their flying has dropped dramatically.
This is a little rough, but it will give you a sense of what’s going on. The chart below looks at the number of June block hours per aircraft in the fleet. Where it gets squirrelly is that I have fleet numbers only as of December 31, 2021 for most airlines, but I have March 31, 2022 for Endeavor, Mesa, and SkyWest. So the numbers may be a bit off as aircraft either retire or get added to the fleet, but you’ll get the idea.
Daily Scheduled Block Hours Per Contracted Aircraft by Regional Airline
It is a bloodbath. On the left you see December 2019 which is what the airlines were doing at full strength. Naturally December 2020 is much lower, and even December 2021 should be lower since the recovery hadn’t full kicked into gear. But by June 2022, you would expect to see a lot more flying, especially since most of it is domestic so it doesn’t face the same issues as, say, China flying would. But some airlines actually are flying less in June 2022 than in December 2021..
The best performers vs 2019 are Piedmont and Republic, down just a smidge over 18 percent. And that’s good. The worst is GoJet down 75 percent, but that airline flies only business-focused CRJ-550s, so I’ll give them a bit of a pass. Just below that, however, you have Mesa down 65 percent, Envoy down 64 percent, and Commutair down 62 percent.
This isn’t an issue with demand. This is an issue with getting enough pilots to fly the airplanes. Ric over at Envoy told me that the issue isn’t actually attracting new pilots. He said they get 250 qualified applications a month and they only hire 60. He says the bigger issue is that they come in, get their hours to move to the left seat, and then they move on to ultra low cost carriers, cargo operators, or fractional jet companies. Then they eventually move to the big guys. Piedmont says it only needs to hire 40 a month with its smaller fleet, but it needs help both in hiring and retention.
The idea behind this agreement is that it boosts the pay enough that it will keep pilots at the regional until the flow-through agreement kicks in and they move up to American. This gives them more of those 3-6 year captains that they so desperately need.
They have had to put all kinds of extra guarantees in here as well. For example, if a pilot isn’t offered a job at American by the end of their fifth year, they will automatically be given the top 20 year captain rate of $213.75 per hour. Envoy says that shows “our firm belief in the flow program,” but it’s also going to make things exceedingly expensive if American stops hiring in the next couple years. Of course, that is highly unlikely.
What’s most remarkable about this is that American’s first year first officers? They also make $90 an hour (though it quickly rises to $137 in year two). So you can imagine at some point the question becomes… why bother with having the regionals at all? This has been a pilot union dream for years — get rid of regionals and get everyone paid at mainline levels. You have to wonder if this is a step in that direction.
Sure, the pay rates are temporary right now, and they should fall back down, but what if pilot demand is still high? They may need to extend it further. At some point, it may become permanent and then, why not just roll everything into mainline? Both Ric and Steve said there were no discussions happening along those lines, but it’s too early to know where this will lead.
There’s also the question of whether this is at all economically sustainable. Piedmont flies only single cabin, 50-seat jets. When you have pilots making that much more money, it can add a significant cost per seat on an airplane that small. The 50-seaters are getting older and will require more expensive maintenance. Nobody is building new versions of those airplanes. At some point, the economics make it not worth flying those airplanes at all.
These are things that had seemed to be in the distant future before, but things can accelerate quickly. It’s hard to know exactly where this ends, but it would seem likely other regionals will end up in an arms race for pilots, further increasing their offers as a way to steal from each other. While wholly-owned operators are probably safe, you can imagine the smaller independents like Air Wisconsin, GoJet, and Mesa may be the ones left standing once the music stops.