Republic to remove 27 aircraft in face of pilot shortage

Washington DC
Source:
This story is sourced from Pro
See more Pro news »

Updated with a modified headline, and comments from American, Republic and United

Republic Airways will remove 27 regional jets with up to 50 seats in 2014, as a lack of qualified pilots forces it to reduce its fleet and analysts say could put its Bombardier CSeries order in jeopardy.

The aircraft in question are 15 Embraer ERJ-140s with 44 seats operating for American Airlines and 12 Embraer ERJ-145s with 50 seats operating for United Airlines, according to an investor update today. The aircraft will exit the Indianapolis-based regional carrier’s fleet by the third quarter.

Removing the aircraft is expected to reduce 2014 revenues by $18 million to $22 million, says Republic.

The “significant reduction in qualified pilots who meet the congressionally mandated 1,500 hour pilot experience rule” is behind the decision to remove the aircraft, the airline says.

The new US Federal Aviation Administration (FAA) flight and duty regulations went into force on 4 January. In addition to the new 1,500 hour experience requirement – it was previously 250 hours - they also include duty time restrictions, which JetBlue Airways cited as a reason for the temporary grounding of its operations in the northeastern USA following a snowstorm in January.

“We continue to believe the regional airlines will struggle to find pilots due to the new pilot rules,” says Helane Becker, an analyst at Cowen Securities, in a report today. “As a result of the limited pilot availability we expect to see reduced flying by the regional carriers and pilot wages increase.”

If pilot hiring remains an issue for Republic, she says that the airline could “potentially cancel, without penalty” its order for 40 CS300 aircraft.

Republic says that the lack of qualified pilots has no impact on its CSeries order.

The carrier and its pilots union, the International Brotherhood of Teamsters (IBT), also remain in protracted contract negotiations, following the rejection of the airline's last, best and final offer in March 2013. Wayne Heller, chief operating officer of Republic, said in November 2013 that there was only a "remote possibility" of new talks in 2014 due to the US National Mediation Board's “case load and budgetary constraints”.

Republic anticipates extending 14 ERJ-145 aircraft on a fixed-fee basis whose contracts expire in 2014, according to the investor update. These are in addition to the 27 aircraft that it will remove.

The additional aircraft likely operate for Delta Air Lines, which is Republic’s only remaining ERJ-145 operation after American and United.

The ERJ-140 and ERJ-145 removal could occur faster than American and United expected. At the former, Republic plans to remove eight ERJ-140s in the first quarter, five in the second and two in the third, according to its fleet plan.

However, American only planned to reduce its ERJ-140 fleet by five aircraft in the first quarter, nine in the second, eight in the third and three in the fourth, according to its 28 January fleet plan. These numbers also include planned retirements from its Envoy subsidiary fleet.

The mainline carrier says that it is still assessing the impact but does not expect any change to the markets they serve.

Republic will take delivery of 25 76-seat Embraer 175s under contract for American in 2014.

The regional carrier plans to remove all of the 12 ERJ-145s that it flies for United in the first quarter, according to its fleet plan. However, the Chicago-based mainline carrier included no ERJ-145 retirements during the first or second quarters, 16 in the third and nine in the fourth, in its fleet plan on 23 January.

United says that the aircraft are included in the flight reductions at its Cleveland hub, which were announced on 1 February. The cuts begin in April.