United Has a Shot at The Regional Flexibility It Craves

At the International Aviation Forecast Summit last week, United President Scott Kirby was unsurprisingly in high demand. After his presentation, he took a few minutes to sit with a handful of media so we could fire questions at him. I asked Scott about “scope relief,” something I wrote about back in March. As always, he wasn’t shy in his response. In fact, Scott said that United is already in negotiations with the pilots on this issue. While I would have thought this was impossible before, I now think there could be an opportunity here.

I realize this needs a little background before we get into Scott’s comments. Airlines have “scope clauses” in their contracts with pilots. These scope clauses limit the number, type, weight, and seat count of aircraft that can be flown by regional providers under the mainline brand. These were demanded by pilots to protect mainline pilot jobs from being outsourced to lower cost providers.

United will tell you it has the most restrictive scope clause of the big three US airlines, but that’s not entirely true. Here’s a comparison:< 51 Seats70 Seats76 SeatsAmericanNo meaningful limitCan’t exceed 40% of mainline fleet size (~380 today)Delta102223United102153 (+70 if United adds a small narrowbody airplane)

So yes, technically United has the most restrictive rules now, but in reality it has the exact same scope clause as Delta. The only difference is that Delta brought 717 aircraft onboard as a mainline aircraft, so it could have 70 more of the 76-seaters. United could bring on either the A220 or the E90/95 family (as noted in the contract), if it wanted to add those 70 additional aircraft itself, but so far it hasn’t done so.

What Scott probably really wants is American’s scope clause, but presumably he’d settle for something in between. After all, United is now trying to grow its mid-continent hubs (Chicago/Denver/Houston) to be more competitive, and part of that requires more regional flying as well. Here’s what Scott said when I asked him about scope relief.

I hate using the term scope relief, but first I’d say I completely understand why our pilots feel the way they do because the way United used scope in the past is to fly markets like Dallas to Chicago, Newark to Atlanta; places that never should have been regional markets. They did not use to fly markets like Denver to Columbia. That is what we’re doing now. The reason scope clauses exist is because pilots want to protect their jobs and don’t want their jobs to be outsourced. They want to grow. The good news is at United we are growing and that’s going to continue. It’s working well and we’re going to grow. That creates a backdrop where I think we can create, we’ll ultimately be able to get to a deal where our pilots feel good that their careers are not jeopardized by scope and in fact are enhanced by having a competitive scope clause where we fly a competitive number of regional jets. But they’re going to want us to fly them in the right places and they’re gonna want the kind of protections that make sure they know that they’re gonna have career growth opportunities. A lot there but at the end of the day our interests are aligned, and using regional jets to fly in regional markets to feed the mainline is one of the keys to how we make this airline grow. And it is in the pilots best interest and because of that I think we’ll get to a deal which works for them and for us.

This isn’t particularly new, but what is new is that from what I understand, there is a possibility that a deal will get done. Scott isn’t wrong in what he’s saying about the pilots. They are right to be wary about how regional partners have been used at the airline before, and they do want growth. So how can they come to an agreement?

On the pilot side, the group is putting out videos about what it sees as the two options. Here’s the most relevant one:

Unsurprisingly, the message is “buy A220/E90/E95 aircraft and you can expand your regionals under the current contract or we’ll be happy to fly those 76-seaters for you at mainline.”

The pilots think they have a good case on the latter, especially now that United is taking delivery of Embraer 175s with only 70 seats in them to fit under the cap. The Embraer 175 should probably have about 80 seats onboard, or another row than they have today. The only reason they don’t is because the contracts cap regionals at 76 seats. Seeing these airplanes with only 70 seats on them has to make the pilots salivate. If United has a regional operating the Embraer 175 with 70 seats, then could it really be less economical for United pilots to fly them with 80 seats (or more)?

Knowing that United isn’t going to want to bring that flying back in house, it’s hard to see how there’s a deal to be made along these lines, but this is all public posturing anyway. Look beyond that posturing and you can see where a deal might be made.

As mentioned, United has been growing its mid-continent hubs lately, but a lot of that flying is being done with 50-seaters. And United has a LOT of 50-seaters. As a comparison, Delta’s most recent 10-Q said it had 128 50-seaters flying under its brand. United, from what I can tell, has more than double that at more than 275. That doesn’t include the more than 30 aircraft that Commutair is still adding nor the 20 aircraft that it just signed up ExpressJet to fly. This isn’t ideal since 50-seaters are cramped, more costly per seat, and they don’t have a First Class or Economy Plus offering. United has maxed out its 70- and 76-seaters under the current deal, so if it wants to improve revenue and reduce costs, it either needs to add more mainline or it needs regionals to be able to fly more of the 76-seaters.

United wants to grow, and pilots want growth as well. There may be something here if United can guarantee that growth and offer pilots enhanced job protections. It can also commit to reducing the number of 50-seaters so that pilots can be more comfortable that the new growth will replace smaller, existing aircraft. If United is willing to make those commitments, then might be able to get at least some of the scope relief it seeks.

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Muscat,  Oman
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