Starting Salaries On the Rise at Regional Airlines

 - December 22, 2016, 3:33 AM

While starting salaries for pilots at U.S. regional airlines have historically been low and accepted as a fact of life, that paradigm finally appears to be shifting.

It has long been an industry truth that pay rates for first officers at the feeder carriers were unfavorable, a point that was illuminated by the 2009 crash of a Colgan Air Q400 (Continental 3407) near Buffalo, N.Y. Newspaper articles at the time described the 24-year-old copilot’s cross-country commute from the Seattle-area home she shared with her family to her Newark Airport home base that morning to catch the doomed flight. Her annual salary was $16,000 a year.

Seven years later the compensation has improved, albeit only somewhat. Last August the Air Line Pilots Association (ALPA) issued a press release that provided a sampling of estimated first-year pilot base salaries exclusive of any bonuses, with Mesa Airlines offering $20,183, according to the union, while Great Lakes was listed at $29,484. In between were the three wholly owned American Airlines subsidiaries: PSA ($22,104), Envoy Air ($23,256) and Piedmont Airlines ($26,422). “While first-year salaries for pilots at regional airlines are moving in the right direction, new pilots are looking for a long-term career with growth and good quality of life,” said union president Tim Canoll at the time.

Shortly thereafter, in mid-September, there was a spate of press releases touting higher pay rates for starting pilots by Envoy Air, PSA and Piedmont. Envoy announced it “will nearly double the starting rate of pay for new hires, to nearly $38 an hour.” Likewise PSA’s release stated it would implement “an immediate 56-percent increase in first-year wages.” Piedmont noted that first-year first officers will now “earn nearly $60,000 while training and flying under the colors of Piedmont’s parent company, American Airlines.”

Airline pilot salaries are largely determined through collective bargaining between the carriers and their pilot negotiating committees, which tend to be dominated by captains. As a result, more emphasis is placed on seniority when it comes to determining shares of the compensation pie.

 “First-officer salaries have increased not just in the last couple of months, but over the past couple of years,” said Faye Malarkey Black, president of the Regional Airline Association (RAA), who noted such bargaining is in place at most of the group’s members. She pointed out that the collective bargaining process has incorporated some innovative ideas to include the first officers. “In many cases where an airline wasn’t able to secure the boost through the collective bargaining process for that first-year first officer, they’ve offered bonuses.”

Before 2001, the airlines were growing at a steady clip, but that changed after 9/11, noted Piedmont Airlines CEO Lyle Hogg. “After 9/11, the industry was going through a difficult time. There were a lot of furloughs, there were bankruptcies, there were negative news reports about concessions that pilots had to take, and it wasn’t a really attractive industry for either new pilots or for pilots to get out of the military and give up their military career,” he told AIN.

“Certainly after 9/11 and the two economic recessions, there was not a lot of hiring happening at the mainline carriers, and so the pilots at the regionals did stagnate and stayed there in some cases—for those that wanted to move on—longer than they had anticipated,” said Paul Ryder, ALPA’s resource coordinator.

Temporary Incentives

But as the U.S. has steadily clawed its way back to relative economic health, things seem to be on an upswing for those interested in a pilot career, even as costs for pursuing an aviation degree and pilot certificate in a four-year academic program can approach $200,000. “When you are talking about salaries below $30,000 and living in a metropolitan area, it doesn’t take much imagination to picture what circumstances that puts an individual into,” said Ryder. “I do think it’s important to address the compensation in a manner that allows airlines to recruit and retain the type of pilot they want to hire.”

“As the economy has turned around and gotten better, there are more employment opportunities for pilots,” Ryder told AIN. “If you’re looking for someone to serve as a pilot, you have to compete with other interests, and we’ve seen this trend over the last couple of years.”

Signing and retention bonuses cover much of the slack to make for a more enticing wage. At Piedmont, new hires currently receive a $15,000 bonus ($20,000 if they have previous regional airline experience), and other carriers have likewise implemented similar opportunities. Retention bonuses are also in play to keep pilots from leaving to claim hiring bonuses at other airlines.

Because of the recent changes in flight-hour requirements for first officers—1,500 hours of flight experience in most cases—many candidates work as flight instructors. As part of its pilot recruitment initiative, Piedmont offers its Cadet program, allowing potential pilots who sign a letter of intent to work for them once they fulfill their experience requirements to receive an advance of $500 a month on their bonus to help defray living and student loan expenses. That amount would have to be repaid if for some reason things did not work out.

At Piedmont, where first officers will likely advance to captain after a year, second-year salaries for Embraer jets increase to $59.03 per hour, plus a captain retention bonus of $7,500. Those who do not upgrade to captain will receive a salary of $40,770 (based on 1,000 hours) plus a $10,000 first-officer retention bonus. Performance bonuses and profit sharing also serve to sweeten the deal, while pilots who elect to remain on the Dash-8 turboprops receive more incentives.

“We’ve seen these bonuses become more commonplace, and that is certainly a step in the right direction, and I think that should be recognized,” said Ryder, who believes that the bulk of the increases are merely temporary to address staffing shortcomings. “That’s where we feel that if the airlines want to encourage the next generation to begin flight training, and recruit and retain the current generation of pilots, they’re going to need to make these changes more sustainable and more permanent.”

“I think they are going to be permanent because of the demand in the industry,” Hogg told AIN. “If you look at the large mainline carriers—American, United, Delta—they’re all going to be hiring a tremendous number of pilots in the coming years.” The dynamics that will lead that demand hinge on the mandatory retirement age of 65 for air transport pilots, he noted. “Airlines typically grow in peak economic times, so when you’ve got 12 to 18 airlines all hiring pilots at the same time and then you merge those carriers, each carrier’s seniority list is packed full of pilots pretty much the same age all hired during those peak economic times,” he explained. “We just happen to be coming at a peak in the industry when a lot of pilots are retiring at age 65.”

Pilot Shortage?

“At this point there is a very constrained supply [of pilots],” noted Black, adding that her constituents filled 64 percent of their desired new pilot quotas this year. “Airlines are just poaching pilots from one another, and what we really need is a new influx of pilots.” She noted that the current barriers of cost and flight hour requirements are acting as an anchor on the student pilot pipeline and could have a major impact on the industry. “The [pilot] hiring at major airlines in the next four years is going to approach 18,000 to 20,000. I have between 17,000 and 18,000 pilots flying in my entire membership, so [the majors] are going to burn through our entire pilot supply in four years,” she explained, adding that a study conducted by the University of North Dakota showed that in a decade there could be a deficit of 14,000 pilots in the U.S. airline fleet alone. According to the RAA, its members are already having to alter their schedules and routes to work around crew availability.

Yet ALPA disputes the notion that there is a pilot shortage. “Currently we have an excess of pilots who hold an ATP rating who are under the age of 65 and have a first-class medical,” Ryder told AIN. “When we hear people talking about a pilot shortage, we think that the data shows otherwise, and I think the distinction has to be whether it’s a pilot shortage or an applicant shortage.” The shortage is one of pilots who are qualified and who have the interest to work for regional carriers’ wages, “and that’s an important distinction to make.”

Hogg disagrees, citing the pace of advancement and the flow programs, which could move pilots to different pay scales at the major carriers (American Airlines in his company’s case) in a matter of several years. “People can look not that far down the road to a very high salary,” he noted, “so to me it’s not the fact that people are not coming back to the industry because of pay; the numbers just aren’t out there.”

It’s clear that pilots will gain more leverage in the future, but unless pilot production picks up, the effect on the industry could be deleterious, according to RAA’s Black, as the regional airlines’ growth could be hampered by a pilot shortage—even as they experience 80-percent load factors, the highest they have ever seen. “To some extent it’s Economics 101: supply and demand,” she acknowledged. “Salaries are going to go where they’re going to go, but if we don’t get more pilots, then the regional airlines that are offering the salaries are going to become pretty unhealthy, and the major airlines that are relying on that lift and all of those salaries that are dependent on their health are going to become pressured. While the market scarcity has been perceived as a boon, and has certainly provided some measure of collective bargaining leverage…I would caution that too much more pressure may kill the golden goose.”