Skeptical Humorist

A friend asked me about my thoughts on Delta Air Lines’ sale of Mesaba Airlines to Pinnacle, and Compass Airlines sale to Trans States Airlines.

My opinion is that it means there is no way for the CAL-UAL pilots to capture the 70 seat aircraft under a scope clause in their common contract. Delta’s given it up, American’s given it up, and US Airways has given it up. Competitive market conditions will not allow CAL-UAL management to do otherwise. With the sale of these airlines, 70 seat turbofan a/c are now a confirmed regionally competitive commodity operated by some half dozen multi-entity holding companies, and those firms will be contracted by all the major brands on lowest cost/best performance.

I know this is heresy to the CAL pilots. But doctrine is usually hope, and rarely an analysis of reality.

American Eagle is also on the block and could be sold imminently, undoubtably to one of the existing holding companies performing other small-jet contract carriage. Eagle has 70 seat capacity. I think only Eagle and Comair of Delta are the remaining substantial small-jet carriers that are wholly owned by a branded carrier. US Airways has one or two small operations which they probably retain because they can’t reasonably be divested.

The effective impact is to remove any possibility of a branded carrier’s pilot union to establish a single seniority list ranging from its small planes to its largest planes. This removes a company’s threat of a single job action to force the temporary closure of the brand. In place of a single labor contract, the branded carriers will continue to subcontract out large portions of its work governed by different labor agreements. If a job action occurs in any one of the component entities, its impact will be mitigated by the others.

I think that Expressjet is now the only “major” regional that does not fly 70 seaters, solely due to CAL’s earlier onerous Capacity Purchase Agreement requirements. XJT is now in a position where it must acquire 70 seat lift to survive into the future. That is probably the new CEO’s second, longer-term assignment after reducing company costs over the near-term. He’ll be looking at 70 seat contract opportunities with the new UAL, where we have some leverage. And as necessary, he’ll be looking at merger/acquisition opportunities, knowing that the pilot group has some ability to restrain such actions.