A Race to the Bottom

I shouldn’t have been surprised to read that the Air Line Pilots Association (ALPA) has joined forces with several U.S. carriers in fighting a foreign carrier permit for Norwegian Air.  After all, in ALPA’s view, the Ireland-based carrier is in a “race to the bottom” in establishing wage rates and working conditions for its workers.

This blog isn’t, however, about Norwegian. It’s about the race to the bottom that has been a part of the network carriers’ DNA for decades.  It is about the relationship between mainline and regional carriers.  It is about the fact that low labor rates at regional carriers cross-subsidize the higher rates paid at the mainline, and what that could mean to hundreds of communities.

I need more than fingers and toes to count the number of smaller airports that are deeply concerned about their future as a dot on the airline network grid.  Many of these communities have strong underlying economics that suggest that their place on that map is safe.  But as the industry evolves, that is not necessarily the case.  The real question is whether the network carriers will actually need all of the feed from their regional partners to fill those mainline tubes as they serve only bigger and bigger markets?  At risk is service to smaller communities as airlines gravitate to only the largest markets in a network map that could look much like it did when deregulation began with the primary difference being a map that is hub-centric.

In my opinion, the industry went too far during restructuring in its use of third-party providers in the out stations. It made sense when the industry was trying to bank every possible nickel and, perhaps, makes some economic sense today.  But the fact is that no third-party provider really cares about an airline’s customers the way an in-house employee does.  As airlines compete more on service, this has to change.

I fear that, in investing in this industry, the focus on the mainline ignores the critical piece of the network served exclusively by regional carriers.  When it comes to regional lift, business still goes to the lowest bidder.  And one result is that regional pilots get whipsawed despite the fact that there is a real live pilot shortage that will impact the industry well beyond the regionals. 

Part of the blame goes to Congress which, in its infinite wisdom, now requires 1500 hours of flying to qualify for a commercial pilot license.  And while Congress mulls more hearings, the regional carriers are suffering the consequences, intended or otherwise.

New flight and duty time rules only compound the problem.  With the day’s last inbound flight often canceled, the first departure in the morning is also affected. And in small communities, these are the flights that allow business to be conducted in a day. This is not the fault of the airlines any more than it is the fault of employees who are “timed out” for the day. The customers, however, pay the price, as do the small communities so reliant on reliable air service.

Meanwhile airfares for service to those small communities continue to rise even as larger markets gain the benefit of more competition. Those customers are not, however, getting more for their money.

Don’t get me wrong. I am a fervent believer in the direction the mainline airlines are going.  Recent investments in the fleets, cabins, services and people of the mainline carriers are making for a much better product– domestically and internationally.  But I am disgusted with the price the regional carriers and their people are paying, be it through the whipsaw or the general neglect of a critical component of our domestic air service.

When a market doesn’t fit, it’s time to attrite. So let’s start trimming back that service now rather than delaying the inevitable.  Let’s begin to build a pool of pilots to service the 250 or so markets that will make the cut – a pool big enough to meet the demand driven by Washington’s arbitrary regulations. ALPA advocated for consolidation for all of the right reasons, first and foremost a stable industry. So why is it only the mainline pilots who should enjoy that benefit?

ALPA cannot make its race to the bottom case against Norwegian without first addressing the race to the bottom here at home – a downward plunge the union itself created. The economics of the regional market are distorted, influenced by middlemen and unresponsive to consumer demand. Now is the time for the industry to work with ALPA to fix the problem – and that probably involves bringing some, if not all, of the work back in-house.