Regional Airline Contour Offers Big Lessons for Pilot Staffing Challenge

Photo credit:  Flickr / Glenn Beltz

They say imitation is the greatest form of flattery. That maxim is proving true in the U.S. regional airline sector as it looks to combat a pilot shortage that threatens air service to small communities across the country.

SkyWest Airlines’ proposal for a new operating subsidiary, SkyWest Charter, would imitate a model that has proven successful for many others. It hopes the move, which would complement its core business flying planes for major carriers like American Airlines and United Airlines, would expand its supply of pilots — particularly captains — and allow it to continue flying to at least 20 smaller cities across the U.S. that it has proposed dropping.

“It’s SkyWest mimicking our operating structure exactly,” Contour Airlines CEO Matt Chaifetz said. “The world’s largest regional airline sees merit in what we’re doing, I welcome the competition and will also take the moment to relish that we have been doing something right.”

What Contour does is fly under what the U.S. Federal Aviation Administration defines as “Part 135” public air charter airline, rather than “Part 121” regularly scheduled air carrier that includes everyone from SkyWest currently to American. While the difference between the two is largely indiscernible for passengers, the rules around pilots differ in several key ways: one, first officers at 135 airlines only need at least 250 hours of training as opposed to 1,500 hours at 121 carriers, and there is no mandatory retirement age. A downside is that the former can only fly planes with up to 30 seats, and it cannot operate as an “express” airline under a contract with, for example, Delta Air Lines or United.

Changing the operating model is not the only answer to the pilot shortage. One method, taken by Alaska Airlines and United, is to start a flight school and provide financial aid to attract more people to the profession. That approach, however, takes years to produce new, certified cockpit crew members. Another is to raise entry-level pilot pay to attract crews; American has taken this path with its affiliates. Some argue that this approach effectively robs Peter to pay Paul because the overall supply does not change. And a third, as proposed by Senator Lindsay Graham (R-S.C.) in July and first reported by Airline Weekly in May, would be to raise the mandatory retirement age by two years to 67.

U.S. airlines are likely to hire around 12,000 new pilots this year, and another roughly 8,000 in 2023, according to a recent report by Raymond James analyst Savanthi Syth. She estimated that there are enough overall pilots to meet this demand but that captains, which require more hours — regardless of a 135 or 121 certification — than entry-level crew members, were a constraint for regional airlines.

The ranks of 135-certified airlines include Cape Air, private-like JSX — that counts JetBlue Airways and Qatar Airways among investors — and Southern Airways Express. Many have not faced the same issues hiring and retaining pilots as their 121 competitors.

“The [pilot] issue is not easier,” Chaifetz said when asked about pilot staffing as a 135 operator. In his view, attracting and retaining pilots is a combination of offering competitive pay on aircraft crews who want to fly with flexible work-life balance. Contour, he said, starts captains at a competitive $118,000 a year, flies Embraer ERJ regional jets rather than single-engine propeller planes, and offers paid commutes from a pilot’s home to work.

Higher pay and free commutes from home come at a cost though. The point-to-point flying that Contour did before the pandemic — for example, between Santa Barbara and Sacramento in California — is gone now due to poor economics in favor of routes that benefit from the Department of Transportation’s Essential Air Service subsidy program. Chaifetz said communities outside of the program may need to create their own permanent incentive programs to maintain commercial air service.

“With labor rates, and fuel where it is, a lot of these markets are going to need continuous subsidy if they want to retain service,” he said.

As Chaifetz said, simply being a 135 airline does not guarantee a supply of pilots. Cape Air, for one, has struggled with cockpit crew staffing. However, most pilots at the Massachusetts-based airline need to have at least 1,200 hours — the requirement for captains at public charter carriers — as opposed to 250 hours for first officers because most of Cape Air’s flights operate with a single crew member.

“What makes Contour different is we have the right aircraft, the right gauge,” Chaifetz said of attracting pilots, and particularly captains.

Captains appear to be the challenge at SkyWest as well. During the Utah-based airline’s second-quarter results call on July 28, CEO Chip Childs said they were its “largest constraint” to flying more owing to the fact that, in his words, “SkyWest pilots being the most sought after in the industry.” The carrier is working to add new incentives to retain pilots and captains and to reduce attrition. But even with these moves, Childs said pilot staffing will likely constrain capacity until the end of 2023 or early 2024.

“The captain supply is what becomes most intriguing to us because of the [level of] … interest that we’ve seen from existing experienced captains in the industry that want to participate in this operation,” Childs said in response to questions on how SkyWest Charter addresses the pilot situation. “To the extent that the pilot supply thing works with this, I think it does help out on the captain side because you need captains to create captains.”

Entry-level pilots, or first officers, must fly with a captain until they upgrade to what is called the “left seat;” a reference to the captain’s chair in the cockpit.

For now SkyWest must wait for the DOT to sign off on its SkyWest Charter plan. Childs expects flights to begin in the fourth quarter or, at the latest, early in 2023.

But others are not waiting for SkyWest Charter to get its certificate to expand. Contour has already added two former SkyWest destinations — Plattsburgh and Ogdensburg, N.Y. — to its map and plans to add six more pending DOT approval. Southern and others have also applied for the essential air service contracts.