Anders Clark

Republic Airways recently filed for bankruptcy, but few people were aware of it. That’s in part because Republic Airways is not a recognized name in air travel. However, many people fly with Republic on a regular basis and just aren’t aware of it. Republic operates a variety of flights for Delta Connection, United Express and American Eagle, the big airlines’ affiliates for shorter flights and / or less popular destinations. In fact, as many as half of all Delta, United and American branded flights are in reality handled by regional airlines like Republic. Most people who fly with any regularity have likely flown with Republic or one of many other unknown regional airlines.

According to Republic’s CEO, there were several problems that led to the bankruptcy filing, but the primary issue was “…grounding aircraft due to a lack of pilot resources.” And they’re not alone in this problem. Last October, Seaport Airlines, another regional airline, dropped most of the routes it was flying from its Memphis hub, also due to a lack of qualified pilots. But this pilot problem isn’t limited to just the smaller regional airlines, and it is slowly spreading to more known and established names. SkyWest, which also handles flights for Delta, American, and United, reduced their flight capacity last year. And during SkyWest’s third-quarter earnings conference, President Chip Childs did acknowledge that they are “not immune” to the shrinking number of pilots and, in a transcript provided by Seeking Alpha, that to address the problem, they would need to manage the problem “from the very, very beginning.”

The idea of a “pilot shortage” may surprise those outside the industry as most people assume that there is intense competition for the job of an airline pilot, with the associated high salary, perks and glamour. So what gives? Well, those inside the industry point to two things. First, Congress enacted regulations in 2013 that increased the number of required flight hours for first officers (or co-pilots) from 250 to 1,500 in order to fly for a commercial airline. And there’s a large commitment of time and money involved in accumulating those extra flight hours. Second, while the salaries at and jobs at the big commercial airlines are competitive, newly minted pilots who start flying for the regional airlines can make as little as $20,000 a year. And with consolidation among the major carriers, they hold a strong negotiating position over the regional airlines, which makes it difficult for the regionals to raise wages.

So, for pilots, a low-salary job with a high barrier to entry isn’t very attractive. And when you consider that regional airlines operate roughly half of all the flights in the country, many pilots begin and end careers at the regionals, never able to make the jump to the major airlines. In addition, many young pilots have started signing up for foreign airlines, attracted by higher salaries and reduced requirements.

Forbes, in a recent article, provided an argument that this is not a short-term problem:

“Here’s some hard reality that’s now firmly in place. There is no “pilot shortage”—that term implies a situation where there is the possibility of correction. It isn’t “correctable”—the new regulatory barriers to entry to the pilot profession are effectively permanent. And that means that the availability of this resource will be different than in the past—read: a lot less. Result: less flying of smaller airliners. Less service at smaller local airports.”

Up until now, the effects of all this are being felt primarily by the smaller airlines. But with the pilot pipeline shrinking, and drawing in qualified pilot candidates becoming more and more of a problem, the major carriers may start feeling the effect of the pilot problem soon. In another recent piece from Forbes, they estimate that in the next 20 years, the number of available pilots will only meet two-thirds of the demand. And this could mean the major airlines will have to start dropping routes.

Many regional carriers have been lobbying Congress to change the 1,500 hour rule, but the feeling is that they’re not likely to, as it would make them look like they are prioritizing airline profits over the safety of passengers. In the meantime, the regional airlines are working hard to boost recruitment, including approaching and pitching high school and college students aviation career opportunities. Some in the industry say that with luck, the problem may start to correct itself to a degree. With fewer candidates, salaries will eventually have to go up to draw them in, which should start to make the job more competitive again. But until the issue is addressed and conditions start to change, regional airlines and passengers will continue to take the hit.

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^{Featured Image by Caribb}

Anders Clark

Don’t think the continuing pilot shortage is having an effect on the aviation industry? Tell that to Republic Airways, a major feeder airline who has just declared bankruptcy in New York. Republic flies smaller regional jets for three major carriers, Delta Airlines, American Airlines and United Airlines. And they say that the continuing pilot shortage caused them to ground so many planes that filing for bankruptcy became their only option. “We worked hard to avoid this step,” said CEO Bryan Bedford.

Interestingly, Republic Airways is relatively healthy financially speaking, reporting an overall profit for eight straight quarters. They are literally declaring bankruptcy because they don’t have enough pilots to cover all their scheduled flights. In addition, it has been reported that they are also leasing a large number of smaller airliners, in particular 50 seaters, that have become a cost drain to fly and are not favored by major carriers. According to a statement released by Republic Airways regarding the bankruptcy, this appears to be a move on Republic’s part to find a way to re-size their business and better match the size of and aircraft in their fleet with the number of available pilots.

“Over the last several months, we’ve attempted to restructure the obligations on our out-of-favor aircraft – made so by a nationwide pilot shortage – and to increase our revenues. It’s become clear that this process has reached an impasse and that any further delay would unnecessarily waste valuable resources of the enterprise. Our filing today is a result of our loss of revenue during the past several quarters associated with grounding aircraft due to a lack of pilot resources, combined with the reality that our negotiating effort with key stakeholders shows no apparent prospect of a near term resolution.” – Republic Airways CEO Bryan Bedford

Currently, Republic has an estimated 240 jets in their fleet and operates roughly 1,250 flights a day to around 100 cities in both the US and Canada. They employee an estimated 6,000 staff, including about 2,100 pilots. But, over the first three quarters of last year, the number of hours Republic has been flying dropped by around 5%. This has caused at least one of the majors, Delta, to file a breach of contract suit against them for failing to operate all of the flights they had contracted to fly.

So, what does this mean for regional carriers? Right now, they operate 45% of the nation’s flights, and are the only provider of flights to many smaller cities. And like Republic, many are starting to feel the bite of the continuing pilot shortage. Industry experts say one of the key concerns is pay. In the past, pay has been so bad that regional pilots can make as little as $23,000 a year. In response to this, Republic has started paying new pilots at $40 an hour, under a contract that went into effect this past November. And while this increase in pilot salary is a marked improvement, industry experts point out that you also need to consider flight hours. Regional pilots can only fly an estimated 1,000 hours a year, meaning that an impressive hourly wage doesn’t equate to as much pay as it may appear to.

Another key concern is the recent change to the number of hours required to fly as a first officer. In 2013, the FAA announced that first officers would now be required to hold an Airline Transport Pilot (ATP) certificate, which requires 1,500 hours of total flight time as a pilot. Prior to this, they were only required to hold a commercial pilot certificate with 250 hours of flight time.

The industry has dealt with pilot shortages in the past, but most of them didn’t last long. But these changes have many industry veterans convinced that unlike those past shortages, this one isn’t going anywhere soon.

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You can get started today by filling out our online application. If you would like more information, you can call us at (844) 435-9338, or click here to start a live chat with us.

^{Featured Image courtesy of Republic Airways}