What’s Next for US Regionals?

During the Great Recession a dozen years ago, smaller communities in the US lost aircraft departures at a rate five times greater than losses at larger airports. “This economic crisis is magnitudes worse than that one,” states the RAA. US Editor Chuck Weirauch outlines the regional airlines status and outlook.

“What’s Next?” Faye Malarkey Black, President and CEO of the Regional Airline Association (RAA) posed that question to the Transportation Research Board (TRB) annual meeting in early January, not long after the US Congress passed the $900 billion in emergency spending bill which includes a partial extension of the highly successful Payroll Support Program, aka PSP2.

However, PSP2 provides for only a 4-month extension through 31 March. Small community air service supports will be needed beyond then.

So, what’s next for regional airlines in the States?

PSP2 “supports airline workers directly by keeping them on payroll, where they are needed. This will help to ensure air service is available to communities of all sizes when they need it to take part in the recovery. The package also provides other assistance for small, regional-exclusive markets, including funding and flexibility for the Essential Air Service program and a boost to the Small Community Air Service Development Program,” said Black.

Nonetheless:

Black told the TRB group that the original CARES legislation in the spring insulated airports against greater service loss during the pandemic. However, the Department of Transportation ‘show cause’ order implementing these requirements “allowed for downscaling and consolidation of served points.” The effect was that 20% of routes operated in November 2019 were not being operated by November 2020; total US carrier frequency was down 43%; regional frequency was down 39% and regional markets were down 15%.

As major airlines lost passenger revenue, regional airlines lost partner revenue. “Most regional airline revenue flows from ASM agreements tied to block hours (flying/production hours),” Black explained. Block hours plunged in mid-summer; down by 90% at the nadir for some carriers. “When block hours are down, revenues are way down.” Block hours ticked back up, but some operators saw another sharp decrease in December and January, similar to those in June/July. “Even where block hours are ticking up,” she said, “it takes more aircraft to fly them because the schedules have become less productive.”

Black argued, “Ultimately, mainlines cannot reach all the markets flying 100+ seat aircraft; networks have evolved to rely on smaller airplanes and this need will not vanish; strong regional airlines will be needed to provide this important service.”

She said, “Regional airlines are rightsized for a reduced-demand environment – even in medium/large markets, where they add frequency, help to rebuild hubs, etc. As markets recover and markets transition mainline traffic back, flexible regionals can fill in the gaps to other places to continue to rebuild and strengthen hubs.”

Pilot Shortage II

The RAA leader also cautioned that “Pilot Shortage II” is looming. “After the last economic downturn, many furloughed workers did not return. Present furloughs could deter future pilots.” Even before early exits, she noted, about half of today’s qualified pilots faced mandatory early retirement within 15 years. “Despite excess workforce today, furloughs will drive future shortages.”

Black added, “The training and education cost of becoming a pilot far exceeds the availability of student loan dollars available to students. The RAA is backing legislation to close this gap. We should take this simple step to avoid a renewed pilot shortage, hindering recovery.”

“Funding is a problem for those who would like to pursue a pilot career,” noted Bill Whyte, the RAA Vice President for Aviation Operations and Technical Services, in his presentation at CAT’s Global Airline Training & Simulation – Virtual in November. “We are engaged in providing input for a bill to amend the Higher Education Act to provide loans for undergraduates up to $137,500. In passing this law, we hope that these changes will help people move into an aviation career.”

Whyte said it is imperative for airlines to support training programs to keep the pilot pipeline flowing to meet the demand for pilots when the industry recovers in the near future. “The important thing to remember is that there will be a pipeline requirement for pilots once the recovery from this crisis begins,” he added. “So, it’s very important for airlines to have training schools that are designed to feed pilots into the system, because the worst thing is for them to stop their training programs. It’s important to keep them going – even at a reduced level – because the colleges and universities are going full steam ahead.”

Whyte bases his optimism for the eventual recovery of the airline industry and the renewed need for pilots on a number of factors. One is that both Boeing’s revised Pilot and Technician Outlook and CAE’s Pilot Demand Outlook for 2020-2029 documents predict that the airline industry will have a demand for a large number of pilots within the next decade, with the CAE report optimistically stating that such a trend could begin in 2021. Indeed, CAE’s publication foresees “an acute need for pilots” starting in late 2021, with the active pilot population expected to return to 2019 levels in 2022.

Predictions for Recovery

Whyte also pointed to predictions provided by professional pilot careers expert Kit Darby that indicate that a recovery for airlines might begin at a medium rate by the end of 2022, and in the worst case by the first quarter of 2024. Darby’s recovery predictions chart also indicates that pilot hiring might begin as early as 2022, if the recovery is not inhibited by the persistence of the coronavirus.

Darby’s charts predict four likely outcomes as to when the airline recovery would begin, with the variables based on how bad the virus gets and how long it lasts. Whyte noted that the virus currently appears to be making a resurgence, as measures that had been applied initially have been relaxed or in some cases abandoned altogether. The virus recovery period could be shortened if effective treatments are found and vaccines widely distributed.

“The advice from Kit Darby is anyone interested in an airline pilot career is to start training now, so that by the time that their training is complete, the airline recovery is likely to be well underway, and airlines will be ready to start a new pilot hiring process,” Whyte summarized.

“Airlines should invest in their pilot training to ensure a steady flow of pilot to meet their needs. There is unlikely to be a need for regional pilots until 2022, but as soon as new hires return, we will need to concentrate on our training programs.”

The Covid-19 crisis and preceding shortage of qualified pilots combined to compel some regional airlines to shut down flight operations and consider bankruptcy (Compass, ExpressJet, PenAir/Ravn, TransStates), according to Whyte. At one time, regional airlines employed approximately 59,000 personnel, with 17,000 flying as pilots.

Filling the Gap

While the increasing number of enrollments at aviation universities and colleges can help fulfill the need to firm up pilot supply once regionals begin hiring, whether that hoped-for increase will be enough to fill the pilot shortage gap is open to question. There is some hope, since the most recent FAA Certified Airmen Analysis, published 1 July, indicates that the number of Airline Transport Pilot Airplane Multiengine-Land with First Class Medical Certificate holders under 30 has increased slightly.

With neither the pilot shortage nor the Covid-19 pandemic under control, RAA officials fear the continuing loss of air service to smaller community airports, as more regional airlines discontinue operations. That fear is compounded by the fact that 436 US airports, or 66%, with scheduled passenger air service get their only source of air service from regional airlines, and 40% of scheduled passenger departures were operated by regional airlines through 2019. Since regionals feed airline hubs serviced by the major airlines, the latter’s revenue may be affected as well by reduced or no service to smaller communities.

“The concern in the industry is that there is not going to be any meaningful increase in the number of passengers traveling until the public is reassured that their safety is assured in the aircraft and around airports,” Whyte emphasized. “And of course, there has to be a reason to travel, be it for business or pleasure. Clearly the number of passengers will be influenced by the introduction of a vaccine. But as time passes, there will be the attrition of pilots from the airlines.”