Pilot shortage forces smaller airlines to cut flights
Starting pay for first officers at regional carriers is a little more than $21,000 a year. It's not surprising that the positions are going unfilled.
A pilot shortage has forced smaller airlines to cancel flights and ground jets, a side effect of federal regulations that have dramatically increased the minimum number of flight hours required for new pilots.
The labor shortages and service cuts have hit first and most sharply at the regional airlines that ferry passengers from small markets on behalf of bigger carriers.
One of the largest regionals, Republic Airways Holdings (RJET), plans to stop flying 27 of its 41 Embraer (ERJ) 50-seat jets because of the pilot shortage. That decision will lower income as much as $22 million this year, Republic said Tuesday in a regulatory filing.
In 2010, Congress mandated that airlines' first officers would need to hold an Airline Transport Pilot certificate -- which requires at least 1,500 flight hours -- as opposed to the 250 hours and commercial pilot certificate previously required. The new rules, which took effect in August, came in response to the 2009 crash of a Continental Express regional flight, which investigators linked to shortcomings in the pilots' training.
Hearings on the accident also exposed to many observers -- including members of Congress -- the surprisingly low pay at regional airlines. The regional side of the U.S. airline industry has long been a fiercely competitive arena in which the big airlines auction large sections of their flight schedules to the lowest bidder.
That's put pressure on wages: The starting salary for a first officer at a regional airline is a little more than $21,000 per year -- about $40,000 lower than the same job at Delta (DAL) and United (UAL), according to the Air Line Pilots Association, the largest U.S. pilot union.
And the stingy pay, in turn, exacerbates the pilot shortage. Not only does it make pilot jobs less appealing, but the small salaries also combine with the more onerous federal training rules to put many new pilots deep in debt. Paying for the necessary hours of training flights before getting a first job can cost more than $100,000.
"There may be a shortage of qualified pilots who are willing to fly for U.S. airlines because of the industry's recent history of instability, poor pay, and benefits," ALPA President Lee Moak said last week in a statement that aimed to refute the "myth' of such a shortage.
The union says that Emirates Airlines pays new first officers $82,000, "plus a housing allowance and other extraordinary benefits," and that thousands of U.S. pilots on furlough and working abroad are "eager to return to U.S. airline cockpits -- under the right conditions.”
Flight cuts caused by the pilot shortage have rippled from the tiniest of airlines to major hubs. Wyoming-based Great Lakes Airlines ended service to a half-dozen small towns on Feb. 1 after seeing its pilot ranks slashed from more than 300 to fewer than 100. United, meanwhile, explained the recent plan to dismantle its Cleveland hub in part by pointing to the inability of regional carriers to staff all of its flights there.
In some cases the bigger airlines, with better salaries, are cannibalizing the lower-paid workforce of their regional partners. "Many of the mainline carriers will hire away pilots to meet their capacity needs coming at a time where the pilot pool continues to shrink," Cowen & Co. analyst Helane Becker wrote in a client note. "As a result of the limited pilot availability we expect to see reduced flying by the regional carriers and pilot wages increase."
The new minimum hours are coming as U.S. airlines grapple with other regulations requiring more pilot rest. The industry also has a mandatory retirement age of 65, which has caused large airlines to replace their pilot ranks by hiring from the regionals.
The grim outlook for regional airline profits is also showing up in their stock prices. Shares of Republic fell 8 percent today and are off almost 15 percent this year. Another large regional carrier, SkyWest (SKYW), dropped 2 percent and has declined 19 percent in 2014.
More from Businessweek
Nothing I would like better then some pissed off, low paid pilot, that has to live with his Mom...
Flying our plane...
If they are crazy enough to work for that kind of money. I don't think that I want to ride with them.
What kind of hours do they have to work for that kind of money?
Copyright © 2014 Microsoft. All rights reserved.
It's time for a reality check in advance of the Chinese e-commerce giant's much anticipated initial public offering.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.