“New” AA Management Ties RJ Buy to More Cost Concessions at Regionals
The management of American Airlines merger partner US Airways has advised American Eagle pilot leaders that it will not place an order for 76-seat regional jets for Eagle or any other regional airline that hasn’t formulated a plan to “trend toward” the cost structure introduced at wholly owned Delta Air Lines subsidiary Pinnacle Airlines, the head of the American Eagle Air Line Pilots Association unit told membership last month. The calls for more cost cuts come some nine months after Eagle pilots ratified a new concessionary deal to help the airline emerge from bankruptcy.
“Despite the direction that Pinnacle was heading, ALPA, American Eagle and AMR agreed that the Eagle pilots had met AMR’s cost savings targets and that was sufficient for AMR’s plan of reorganization,” American Eagle Master Executive Council chairman Tony Gutierrez wrote in a July 8 “Newsblast” to members. “Although we knew at the time that Pinnacle would be less expensive than Eagle, it was believed to be an outlier and not a likely industry trend…What was not public knowledge at the time was that Delta Air Lines has clauses in its regional capacity purchase agreements that essentially allow it to reset the block hour rates that it pays its other regionals to match the second lowest of any of its regional carriers. As a result, Delta’s announcement made public its ability to drive all of its regional feed costs near Pinnacle by the end of 2017.”
Consequently, Delta regional affiliates Republic, SkyWest, ASA and ExpressJet have told their pilots that any new contract agreement must result in cost reductions.
Describing state of the regional airline industry as one of “disarray,” Gutierrez nevertheless urged members to recognize the need for union leaders to “engage” with management to look for a solution.
Gutierrez warned of the possibility of Eagle shrinking its flight operation into “non-existence” by following the pattern established last year with the closure of Delta subsidiary Comair. By the time Comair liquidated in September, its fleet had shrunk to some 70 airplanes—too few, said Delta management, to maintain the economies of scale needed to justify its existence. Gutierrez also reminded members the retirement/return schedule for the Embraer regional jets at Eagle will continue to result in year-over-year capacity cuts unless the airline wins a fresh allocation of new jets.