‘Eating your young’: US airlines poach pilots from regional affiliates

The message from Mesa Airlines could not have been clearer if the US regional carrier had written “Help Wanted” across the sky.

Last week the company announced it would pay a $110,000 signing bonus for captains who join, as well as offering an accelerated career path to higher-paying, more prestigious jobs at United Airlines. It was the latest sally in an industry battle for cockpit talent that is improving pilot wages but contributing to worse service for smaller communities.

Regional carriers fly shorter routes to outlying cities with jets that contain fewer seats than those flown by carriers such as United, Delta Air Lines or American Airlines. The mainline airlines own some regional subsidiaries, while other companies such as publicly traded Mesa or SkyWest Airlines fly under contract with their larger partners.

Regional airlines pay pilots the least, while mainline carriers top the industry’s remuneration ladder. The relationship between the two has become more complicated as mainline carriers poach from the regionals’ ranks to solve their own staffing shortages.

“We clearly have gone through a rough patch,” Mesa chief executive Jonathan Ornstein told investors last week. “We are very focused on pilot production.”

Regional carriers lose about 20 per cent of their pilots in a normal year to mainline carriers, but last year it was more than two-thirds. A shortage of pilots has contributed to cuts to air service in smaller cities, with 161 airports losing more than one in four commercial flights between 2019 and 2022, according to the Regional Airline Association.

Fewer pilots also may increase pressure at budget carriers such as Frontier Airlines and Spirit Airlines to pay their own aviators more and preserve their profit margins by raising fares. United chief executive Scott Kirby said last month that the pilot shortage is driving up low-cost airlines’ labour expenses, closer to those of a traditional mainline carrier.

“The era of $4 prices from Los Angeles to Cabo [San Lucas, Mexico] and $7 from New York to Florida or $9 from Houston to Central America are probably a thing of the past,” he said. “It’s up to other airlines to decide how to price the product. But I’m pretty sure it’s not up to them what’s happening to their cost structure.”

The supply of pilots has tightened over the past two decades, but it never reached a crisis because demand for air travel, and consequently demand for pilots, dropped after the 9/11 terrorist attacks and the 2008 financial crisis, said aviation consultant Kit Darby. About 81,300 pilots worked for US airlines in 2021, according to the latest data available from the US Bureau of Labor Statistics. The total declined 4 per cent from 2019, before Covid-19 again dealt a blow to travel demand. Though the US government mandated airlines not to dismiss workers when they received $63bn in taxpayer funds, they still encouraged pilots to take early retirement or voluntary leave.

In 2021, passengers returned to the skies in the US, and demand increased further last year. The biggest US airlines hired about 13,000 pilots in 2022. The figure was more than double the all-time hiring record, Darby said, and they came from regional airlines.

In particular, network carriers snapped up captains, who have more flying hours compared to their co-pilots, known as first officers. A first officer must rack up 1,000 hours flying alongside a captain to earn the higher status.

The dearth of captains at regional airlines has made it more difficult to run full schedules since every flight needs a captain. Fewer flights makes it harder for first officers to gain the experience necessary for promotion.

“We created our own problem,” Darby said. “It’s like eating your own young.”

Two-thirds of US airports are served only by regional carriers, with states in the Midwest and High Plains regions particularly reliant on their service. Scheduled flights connect communities the wider world and underpin local economies.

But small airports have seen service decline for two decades because of their shrinking populations, the cost of jet fuel and consolidation in the airline industry. The drop accelerated during the coronavirus pandemic. The number of airports with scheduled flights fell 2 per cent between 2018 and 2022, to 556.

The wage battle for regional airline pilots kicked off in June 2021, when American Airlines raised pay at its three regional subsidiaries, Envoy Air, Piedmont Airlines and PSA Airlines. Newly hired first officers were paid $90 an hour, a 70 per cent increase from a previous top hourly rate of $53. The pay rise runs through August 2024. The subsidiaries also added up to $150,000 in bonus pay for pilots who signed on and were promoted.

American bet the raise would solve its own hiring problems, but instead other regional carriers matched it, said Savanthi Syth, an analyst at Raymond James. Now the pay rises are permeating through the industry. Pilots at budget carrier Spirit voted in favour of a deal this month that would raise pay 34 per cent over two years. Delta reached a deal for a contract with union leaders that also would raise pay 34 per cent over the four-year contract. Pilots are voting through March 1 on whether to ratify the deal.

Pay bands still exist between regional, budget and mainline carriers, Syth said, but “the gaps are starting to narrow quite a bit”. Pilot pay combined with other costs, such as fuel, will pressure low-cost airlines to raise fares.

“If your cost structure is higher, you can’t offer those low fares, because at the end of the day they have to survive.”