Flight International - 04

Staffing Strategy
US major is negotiating new
contracts with pilot unions
AirTeamImages
Closing the gap
United executive believes a regulation-driven pilot shortage
and consequent wage inflation will strengthen legacy carriers’
position against low-cost rivals as airlines scrabble for crews
Jon Hemmerdinger Tampa
A
shortage of pilots will
increasingly erode the
cost advantages that have
been long enjoyed by US
discount carriers, while improving
the competitive position of giants
like United Airlines.
At least, that is the view of
United’s head of corporate development
Michael Leskinen, who on 23
February pointed to the USA’s controversial
“1,500-hour” rule – which
mandates pilot experience levels –
as driving the change, something he
calls a “new paradigm”.
“We have never had a better setup,”
says Leskinen, speaking during
a Barclays investor conference.
“The set-up we have over the next
three to five years is better than anything
I’ve ever seen in my career.”
Leskinen backed his comments
by describing broad changes now
affecting the US airline industry.
Carriers, he says, are unable to
expand their fleets as quickly as
they would like due to Airbus and
Boeing being unable to keep up
with delivery commitments – a
result of aerospace manufacturing
supply constraints.
On top of this, a constrained
supply of pilots will increasingly
hinder the ability of ultra-low-cost
carriers (ULCCs) and low-cost
carriers (LCCs) to maintain their
competitive advantages.
“There is no carrier out there –
whether it’s a regional carrier, an
LCC or a ULCC – that can attract
pilots unless [they] want to pay the
going rate,” says Leskinen. “The
incremental capacity from legacy
carriers is going to be [at] similar
cost, or lower cost, than incremental
capacity coming from the ultralow-cost
carriers.”
In search of flightcrew, some US
airlines – notably regional carriers
– have significantly hiked pay in recent
years, even offering $100,000
bonuses to new hires.
Large legacy carriers – American
Airlines, Delta Air Lines and
United – are now negotiating new
contracts with their pilot unions.
However, some ultra-discounters
have several more years to go
before their flightcrew contracts
become amendable.
Competitive advantage
Those discussions will determine
the degree to which discounters
will be able to maintain their chief
competitive edge.
As things now stand, the USA’s
three primary ULCCs – Allegiant
Air, Frontier Airlines and Spirit Airlines
– enjoy a wide cost advantage.
Last year, the trio reported a
combined, average cost per available
seat mile (CASM) of 11.4 cents,
while the same combined figure for
American, Delta and United’s was
62% higher, coming in at 18.5 cents,
financial filings show.
Frontier chief executive Barry
Biffle insisted in September last
year that industry trends are poised
to leave his airline with a cost
advantage better than any US carrier
has enjoyed for decades.
Leskinen points to the USA’s comparatively
strict new-pilot experience
requirement as contributing
to the shortage of crews. That rule,
which took effect in 2013, requires
new pilots, with some exceptions,
to have 1,500h of flight time before
they can work at an airline. Previously,
the baseline was 250h.
“There are not a lot of productive
activities in the world to go from
250h to 1,500h,” Leskinen says.
“There is no quick fix to that, which
means the industry is going to be
chronically under-supplied [with]
pilots for three to five years.”
The 1,500h rule has backing from
some lawmakers and from unions
like the Air Line Pilots Association,
International. Supporters insist
the mandate, which came about
following a deadly 2009 crash, has
improved safety.
But critics have widely blamed
it for causing the pilot shortage
without achieving safety goals.
They say new pilots would be better
prepared for airline jobs by joining
carriers earlier, rather than spending
several years building hours
by, for instance, towing banners or
flight instructing.
Consultancy Oliver Wyman says
the North American airline industry
this year faces an 18% gap between
pilot supply and demand.
“The pilot shortage has pushed
up salaries, especially at the entry
level,” the consultancy said in a
report released on 23 February. ◗
36 Flight International April 2023