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American Airlines takes on some of its pilots

Something like this had to happen eventually. Airlines can’t consistently lose large sums of money and continue to offer ultra-cheap airfares in efforts to steal customers from each other and raise fill rates. At some point they have to – all of them have to – change tactics. And it’s unlikely that they’ll sit down together in a room and hatch a plan to collectively raise airfares, because 1) that’s illegal; and 2) it doesn’t work very well anyway, as the temptation to “cheat” on the cartel becomes too great.

American Airlines has come up with a plan, centered around its service from O’Hare in Chicago, and time will tell if their strategy is ingenious or a customer-alienating flop. Either way, the pilots of American Eagle, which is American’s regional arm for many of its shorter routes, aren’t happy with how it is being implemented.

Central to the strategy is increasing the number of regional flights that use smaller aircraft, such as the 70-passenger Bombardier CRJ700, of which American is purchasing 22 for Chicago this year. Because the planes will “fill up” more (the last customers to purchase their tickets usually paying more than the first customers) and the overall number of seats is lower, American’s average ticket price per passenger should rise. And even with a greater overall number of flights, the higher fill rates will actually mean lower operating costs per passenger.

That’s a nice formula – raise average revenue per passenger while lowering average cost. But for American, there’s another twist – some of those flights will be outsourced at lower cost to a different regional carrier called Chautauqua Airlines. American Eagle pilots have filed a labor grievance, claiming a violation of their contract. Of course, they’re also playing the fear card, portraying the younger, less-experienced (and less expensive) pilots of Chautauqua as being less safe.

Well, if the union doesn’t get its way, we’ll see if the customers agree. And we’ll see if American’s experiment really works. However, with the industry such a mess, what it may mean for the future of air travel is still a long way off.
 

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