Delta Deal Seals Fate of Hundreds of 50-seat Jets
Last week’s vote by Delta Air Lines pilots to accept a contract proposal forged between their Air Line Pilots Association unit and airline management could carry implications for a vital subset of the industry. At issue stands the contract’s scope clause, which will result in the net loss of more than 5,000 seats worth of jet capacity among Delta Connection affiliates, potentially setting a precedent that could spell a sea-change in the structure of the U.S. air transport business.
The new contract, which took effect on July 1, raises Delta’s pilot pay by an average of 4 percent. Under the terms of the deal, another pay hike of 8.5 percent takes effect at the start of next year, followed by 3 percent raises in 2014 and 2015. But perhaps more significantly, it requires Delta’s regional affiliates to shed 218 fifty-seat regional jets as part of a “capacity neutral” scheme that calls the addition of as many as 88 Boeing 717s at the mainline. While, crucially, it allows the regional affiliates to add seventy 76-seat jets to their fleets, increasing the total number of what the airline calls larger, two-class regional jets from 255 to 325, it also caps the number of 70-seat jets at the current level of 102.
All told, if Delta opts to add all 88 Boeing 717s to its fleet, Delta Connection carriers will see a net decrease in 5,580 seats due to the reduction in fifty-seat flying and the mainline would see an increase of 9,680 seats. Once completed, the so-called upgauging would raise the mainline share of domestic flying from 54 percent to 64 percent.
The resulting gain for Delta’s pilots will certainly extend to at least one regional jet manufacturer thirsty for a big sale in North America after a long drought. But it will also likely result in steep losses for owners and lessors of the small jets, whose values will undoubtedly plummet with the resulting glut in supply—not only in ex-Delta Connection airplanes, but potentially in 50-seaters flown on behalf of other major airlines that will likely need to follow Delta’s example to compete.
More immediately, Memphis-based Delta partner Pinnacle Airlines appears a likely candidate for a severe reduction in 50-seat jets. The company, in Chapter 11 bankruptcy protection, abruptly suspended concessionary talks with its employees after concluding based on talks with Delta that it eventually will fly “far fewer” Bombardier CRJ200s than the 140 it operates today. Pinnacle hopes to compete for at least a portion of the new 76-seat jet flying, but Delta informed it that competing regional carriers enjoy “significant cost and pilot seniority advantages” over the one-time Northwest Airlines subsidiary.