Cohen: Balance Sheet Can’t Measure Regionals’ Full Progress

 - May 1, 2012, 2:55 AM
Roger Cohen (Photo: Gregory Polek)

Notwithstanding consistent losses through which the regional airline industry’s publicly traded carriers have suffered lately, the last three years have proved a period of considerable progress on several fronts. Perhaps most notably, the industry has not registered a fatal accident since the Feb. 12, 2009 crash of Colgan Air Flight 3407, in which 50 people died primarily due to pilot error. Since then, regional airlines have answered virtually every demand placed upon them by the legislators and the general public. No stranger to scrutiny, the regional airline industry has once again managed to emerge from an extremely difficult period stronger in many ways than ever, leaving it still better equipped to deliver the safe, efficient product the traveling public expects, RAA president Roger Cohen told AIN as the RAA’s May 21 to 24 annual convention in Minneapolis approached.

Today, at least one collective bargaining group at every RAA member airline has adopted Asap (Aviation Safety Action Program)–the FAA program designed to encourage employees to report safety concerns voluntarily–while 98 percent of all regional airline passengers fly on airplanes operated by carriers that have at least committed to adopting a FOQA (flight operations quality assurance) program, under which various flight data gets “aggregated” or grouped and mathematically combined based on some criterion (time, geographical location, aircraft type) and reported to the FAA.

“Certainly there is universal acceptance [of voluntary safety programs] and virtually universal adoption at every carrier,” said Cohen. “Aviation safety is a shared responsibility, and no one thing can prevent an accident, but the results [speak for] themselves.”

Asked for an estimate of the cost the industry bore in adopting the various programs, Cohen couldn’t oblige. “And you know why?” he asked rhetorically. “Because we’re not looking at it as a cost. We’re tracking everything about the success of [the programs], but the cost is not a question. When something has to be done and should be done, cost is not an issue.”

But as the nation’s regional airlines struggle to turn a profit, new regulations due to take effect next year seem certain only to exacerbate cost pressures.

For example, some estimates place the number of new pilots needed by regional airlines to comply with the new flight and duty time rule at as much as 10 percent above the levels now employed. Even if salaries do not increase due to another new rule to require an ATP certificate for first officers, the change in duty-time limits will fundamentally change the balance of supply and demand for new recruits, threaten service to small communities and potentially nullify some of the gains the industry worked so hard to effect relating to the Essential Air Service program.

“The looming issue of the dwindling supply of trained aviators is just another roadblock to being able to provide service to literally hundreds of communities,” said Cohen, who praised Congress for its bipartisan efforts to raise EAS funding to $190 million in the latest FAA reauthorization legislation.

By the time Cohen spoke with AIN in late March, the RAA had yet to issue comments in reaction to the NPRM on the rule that will require, except under certain circumstances, new-hire first officers to carry 1,500 hours of flying experience.

“I just was at the White House to join with other transportation industry leaders last Friday and we used that opportunity to reiterate that this is the number one issue [threatening] the long-term health and viability of the industry, and to some degree other transportation interests expressed the same thing,” said Cohen. “The difference for aviation is that the bar to gain entry is so much higher…And it’s the responsibility of everyone in aviation to help encourage and stimulate [interest in the field.]

“We thanked the Administration for its leadership for getting this $12 billion FAA reauthorization bill passed in Congress. But that’s $12 billion for a lot of stuff, and that we ought to be taking a lot of that money and making a great investment in the human capital that is needed to operate this system going forward. And that means government support of aviation education and training.”

Unfortunately, government intervention cannot solve some of the fundamental structural ills of the regional airline business. Although statistics show regional airlines fly 49 percent of the scheduled service in the U.S., the industry’s growth curve has flattened lately, as rising fuel prices have created less demand for 50-seat regional jet capacity from their mainline partners, and pilot unions have yet to materially agree on loosening scope clause restrictions to allow for regional jets that hold more than 76 seats. Meanwhile, regional airlines continue to suffer from the last round of contract concessions, following a period in which they benefited tremendously from their mainline partners’ exercises in “rightsizing.” Today, as the major airline industry consolidates and regionals find themselves with fewer and fewer opportunities to form new code-share alliances, companies such as Republic Airways have experimented with new ways to diversify–into the low-fare sector, for example, and make do with less handsome returns from what the majors might at one time have considered extravagant fee-per-departure contracts.

Now, as a significant part of the regional airline industry follows the majors into consolidation, the cost savings the likes of Skywest, Republic and Pinnacle Airlines thought they would see haven’t proved sufficient to reverse their losses. Of course, Pinnacle Airlines and its three operating subsidiaries entered Chapter 11 on April 1, only four months after American Eagle followed parent company AMR into bankruptcy.

Unfortunately, things might not change for the regionals until some of them fail and the marketplace dictates a return to some equilibrium.

Still, ever the optimist, Cohen nevertheless expresses confidence that the regional airline industry will emerge from the financial doldrums as strong as ever. Emphasizing the “incredible resilience” the industry has exhibited during the past four decades, Cohen noted the litany of “challenges” regional airlines have overcome over time, including deregulation, the aftermath of 9/11 and recession.

“Those airlines that were ‘regional airlines’ back then were much less sophisticated, dealing with issues from what we’re dealing with now,” said Cohen. “We now [account for] half of the scheduled flights in the United States, and while we’re going through a little bit of a rough patch now caused by a number of factors–virtually all of them beyond the control of regional airlines–we here at the RAA have every confidence that our members will survive and thrive going forward.”