American desires more scope flexibility as 70-seat cap approaches

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American Airlines continues to believe it remains at a competitive disadvantage relative to its peers through limitations in its pilot contract capping the number of 70-seat jets allowed to operate within its network.

The scope limitations cap American's 70-seat operations to 47 aircraft, and the carrier's subsidiary American Eagle will meet that limit once it takes delivery of the remaining two-class Bombardier CRJ700s it has on order. As of 30 September, Eagle operated 34 of the jets.

During a recent interview with ATI American vice president of corporate development and treasurer Beverly Goulet said: "I do think the constraints we face under our scope clause are issues that we would certainly like to address."

American has one of the more restrictive scope clauses compared to its peers Delta and United, who won some relief during their formal restructurings earlier this decade. A presentation compiled by MIT airline analyst Bill Swelbar shows that Delta can operate 120 aircraft with 71-76 seats, with increases allowed if mainline fleet counts rise. United has no limit on jets with up to 70-seats. Both carriers do have some stipulations in how they deploy the aircraft.

American's roll-out earlier this year of the two-class offering on the CRJ700s heightened the competitive advantage other carriers have in operating significantly higher numbers of two-class regional jets. "The 70-seat aircraft gives us a flexibility to service markets with a product that customers like that just cannot be served as efficiently with the larger aircraft flown at mainline," says Goulet.

American management recently expressed to the pilots its desire to keep negotiating after the National Mediation Board informed American and the Allied Pilots Association (APA) it was unable to schedule any further mediated discussions due to understaffing. The APA said it also wished to continue bargaining.

American is reconsidering its divestiture of Eagle after shelving plans for a possible spinoff a couple of years ago. Goulet explains that a potential divestiture would allow American an opportunity to focus on ensuring over the long term it secures access to competitive regional feed. "Right now I think it is fair to say that the feed we receive is on market based terms," she states. A divestiture would also allow Eagle to pursue opportunities not available to the carrier while it is owned by American, Goulet explains.

"We haven't in fact firmly decided if we will divest, but work is underway. We're considering a variety of transaction forms," says Goulet. "I would say stay tuned over the next few months as we continue the analysis and at some point we'll have something to say about what our decision is and we'll go from there."