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United says no to mainline regional jets

United Airlines president Scott Kirby says the economics do not work for mainline pilots to fly large regional jets in its feeder fleet.

"We have a cost structure that simply doesn't work on small airplanes," he says during a quarterly earnings call today. "We need to spread those costs out over a large number of seats. Spreading them out over 70- or 80-seats simply doesn't work."

Kirby's comments come days after the Air Line Pilots Association (ALPA), which represents pilots at United, questioned the carrier's order for 25 Embraer 175s with 70 seats. The union proposes operating those aircraft with mainline pilots, an increase in operating costs that it claims could be offset by configuring them with 80 or more seats.

United and ALPA are in the early innings of negotiations on a new contract for pilots that would replace the one that becomes amendable in January 2019.

Kirby has pushed for scope relief from pilots for over a year, citing its mainline growth plans as a reason to allow for more large regional jets.

"I will hope, over time, to convince all the pilots that more large regional jets is actually in all of our best interests," he told employees in Cleveland in May 2017.

United is limited to 255 large regional jets, split between 102 aircraft with up to 70 seats and 153 with up to 76 seats, in its feeder fleet. It contracted the maximum number of aircraft at the end of 2017.

The E175s the airline ordered this week are understood to have 70 seats, instead of the more common 76 seats, due to the limit on 76 seaters.

The cap at United is the lowest among the airline's mainline peers, with American Airlines allowed up to 320 aircraft and Delta Air Lines up to 325 aircraft. Kirby has said that this disparity puts the carrier at a competitive disadvantage to its peers.

While Kirby was firm on no regional jets with 70-80 seats in United's mainline operation, he did not comment on the possibility of aircraft with 100 or more seats. The airline has considered a so-called 100-seater – though it would likely seat closer to 100 passengers – including the Airbus A220 or Embraer 195-E2, for years but never moved on an order.

United's current contract with pilots would allow it to add up to 70 more 76-seat regional jets to its feeder fleet in exchange for the addition of a small narrowbody at its mainline operation.

"One caveat to think about is complexity," says Gerry Laderman, acting chief financial officer and treasurer of United, on the possibility of a mainline 100-seat aircraft. "We're getting much better at understanding the cost of complexity of operating multiple fleet types."

The airline would need to operate enough of any new aircraft type to make the added complexity economically viable, he says.

United considered cancelling its order for 35 Airbus A350-1000s last year, with executives saying the small fleet size would be "inefficient" in its mainline operation. Instead, it upped and converted the order to 45 A350-900s in September 2017.

Based on the A350 example, any small mainline narrowbody fleet would likely need to include at least 45 aircraft for United to consider the added complexity worth the cost.

Delta is the only US mainline carrier to invest in a small mainline narrowbody. It operates 91 Boeing 717-200s with 110 seats and has orders for 75 A220-100s that it will also configure with 110 seats.

The Atlanta-based carrier is widely considered the US leader, both in terms of financial performance and passenger experience. Its decision to invest in 110-seat aircraft as part of a large upgauge strategy to reduce its dependence on 50-seat regional jets is partially credited for its performance.

American operates 20 Embraer 190s with 99 seats but plans to remove the fleet in 2019.

The smallest aircraft in United's mainline fleet are its 128-seat Airbus A319s and 126-seat Boeing 737-700s.

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