Issue No. 833

Regionals' Labor Issues Return

U.S. Regionals Are Struggling to Hire as Major Airlines Suck up Available Labor

Pushing Back: Inside the Issue

The U.S. regional sector has long faced hiring issues. Cape Air began actively working to address the impending pilot shortage in 2009, even before the so-called "1,500 hour rule" — largely panned in the sector — came into force in 2013. The pandemic gave regionals a momentary breather in this perennial struggle but now, with the U.S. recovery well underway, the industry is again struggling to find pilots — but also maintenance technicians and people for pretty much any entry-level position. And in the pecking order of airlines, regionals are at an even greater disadvantage when even giant Southwest Airlines can't find enough staff.

Elsewhere, Italy's new carrier and Alitalia successor Italia Trasporto Aereo (ITA) took a step towards an all-Airbus fleet with commitments for 59 new jets, including A220s, A320neos and A330neos. The news came the same week that Air France took delivery of its first A220, which by mid-decade will constitute the majority of the carrier's European fleet. And the Airbus A380 will fly again for another day at Qatar Airways that returns superjumbos to the sky in November to add extra lift. Though its CEO Akbar al Baker may regret his comments a year ago calling the plane its "biggest mistake" ever.

All of these moves are happening as IATA data confirms what many knew: the travel recovery stumbled in August. The Delta variant set back most domestic markets — save for Russia — with few expecting another jump in passenger numbers until the year-end holidays. That isn't stopping budget carriers from adding routes with Vueling jumping on a rare opportunity to expand in Paris, and French Bee returning to San Francisco ahead of what its president sees as "huge" demand.

The Airline Weekly Lounge Podcast

This week in the Lounge, Edward Russell reports back on the annual Regional Airline Association Leaders Conference, where executives said their long-standing labor issues expanded during the crisis. Then, Madhu Unnikrishnan joins him to discuss Qatar Airways’ results, and the American Airlines and Southwest Airlines pilot union objections to vaccine mandates. For a full archive of the podcast, go here. A new episode drops every week.

Weekly Skies

It took a year, but now we know. Qatar Airways, which publishes its audited financial results for the fiscal year only annually, said it lost $4.1 billion in the 12-months ending in March. Part of that was an impairment charge the carrier took for grounding its Airbus A330 and A380 fleets.

Passenger revenue plunged to 8 billion Qatar riyals ($2.1 billion), but the carrier was encouraged by the flexibility of its commercial teams. While the pandemic raged uncontrolled, Qatar Airways focused on repatriation flights and flights to reposition stranded commercial sailors. And it says it also is encouraged by the pandemic’s trajectory. At the nadir of the Covid-19 crisis, the carrier pared back its schedule to operate to just 33 destinations. Now, that number has risen to 140.

“Whilst our competitors grounded their aircraft and closed their routes, we adapted our entire commercial operation to respond to ever-evolving travel restrictions and never stopped flying, operating a network our passengers and customers could rely on,” CEO Akbar al Baker said in a statement.

As with many other airlines around the world, cargo was a lifeline for the Doha-based airline. Qatar Airways’s cargo revenue dwarfed its passenger earnings. The carrier reported 18 billion riyals in cargo revenues last year, and freight traffic was up 5 percent from the year before, despite the collapse in belly-hold capacity. Earlier this year, Qatar Airways told Airline Weekly it had restructured its cargo team, integrating the operation with passenger fleet and network planning, to capitalize on demand.

At the cargo operation’s peak during the last fiscal year, the carrier flew 183 cargo-only flights per day.

Qatar Airways flew just under 6 million passengers last year, compared with 32 million in the previous fiscal year. It earned 29 billion riyals in revenue, compared with 51 billion in the prior fiscal year. Qatar Airways did not get a direct bailout from the government during the crisis, although the airline said it got a $3 billion investment in its equity for continuing operations.

Madhu Unnikrishnan

Aeromexico Maps Bankruptcy Exit

Aeromexico submitted its Chapter 11 reorganization plan to a U.S. bankruptcy court late on Friday. The plan doubles down on the airline’s Mexico City hub where it wants to “strengthen and leverage” its strategic position to expand and grow connectivity. Given the airport’s slot constraints, Aeromexico will do this by flying more larger jets. To this end, it has committed to 40 Boeing 737 Max 8 and 9s, which are larger than the 737-700s and Embraer E170s it retired during its reorganization, to expand capacity at the airport. And has signed for additional Boeing 787-9s from lessor Air Lease Corporation that will allow it upgauge its long-haul flights as demand returns.

All of this planned growth will leverage Aeromexico’s international partnerships. Joint venture equity partner Delta Air Lines is at the top of this list with the plan calling for additional synergies between the airlines including “joint cargo and network services, revenue management and sales best practices.” Aeromexico also plans to leverage its SkyTeam Alliance relationships and, in a nod to Delta’s growing equity partner footprint in South America, Latam Airlines Group. Delta invested in Latam in 2019 and the carriers are in the process of securing regulatory approvals for a U.S.-South America joint venture.

If approved by the court, Aeromexico would exit bankruptcy with $1.19 billion in equity from the issuance of new shares, and $538 million in new exit financing. Delta would maintain a stake in the new carrier; previously the U.S. carrier had a 51 percent stake in Grupo Aeromexico. A hearing is expected on October 21.

Edward Russell

Cargo Demand Remains High But Storm Clouds Appear

Cargo remains the brightest spot in a confusing airline landscape. Now, almost two years after the pandemic roiled airlines, demand for cargo remains as strong as ever and is in fact growing. It was up in August almost 8 percent from the same month in 2019. Air cargo has stabilized at higher than pre-pandemic levels for the last four months, IATA said. August’s growth was down only slightly from the 9 percent jump over 2019 in July, the group reports.

Regionally, Africa reported the largest growth in cargo, up 32 percent from August 2019. North America was second, at almost 20 percent over 2019. Latin America, however, contracted by 13 percent from that year, mainly due to the airline sector’s volatility in the continent.

Although cargo has been a rare patch of blue sky for many airlines during the pandemic, IATA warns that storm clouds are appearing on the horizon. Air cargo has benefited from the industrial restocking cycle, as factories reopen and ramp up to meet consumer demand. But this cycle could be complete. Demand is slowing and the Delta variant is wreaking havoc on economic activity.

And speaking of the Delta variant, factories, ports, and airports in mainland China and other manufacturing regions in Asia have been forced to close in response to the spread of the virus, further constraining cargo traffic. Capacity remains down 12 percent from 2019, mainly due to less available belly-hold space from fewer longhaul international flights.

But the yearend holidays and new technology product launches will provide a ray of hope. IATA expects ecommerce to fuel package deliveries over the last quarter of the year.

Madhu Unnikrishnan

Delta Takes a Bite Out of Domestic Demand Worldwide

The picture for passenger traffic is decidedly more mixed. After great hopes that peak-season demand would approach pre-Covid levels, the pandemic had other ideas. The spread of the Delta variant worldwide has stalled the recovery. This is particularly noticeable in domestic markets, which had provided much of the growth in demand as the initial shock of the pandemic receded. RPKs fell by 7 percent month-over-month in August, the first decline since January, IATA reports.

Large domestic markets, especially China but not limited to that country, began to cool. Brazil, Japan, Australia, and the U.S. all reported declines in demand. Indian domestic demand grew slightly as it emerges from a brutal wave of the disease. The sole outlier was Russia, where domestic traffic in August was 32 percent over 2019.

“August results reflect the impact of concerns over the Delta variant on domestic travel, even as international travel continued on a snail’s pace toward a full recovery that cannot happen until governments restore the freedom to travel,” IATA Director General Willie Walsh said. “In that regard, the recent U.S. announcement to lift travel restrictions from early November on fully vaccinated travelers is very good news and will bring certainty to a key market.”

August RPKs were down 56 percent compared with 2019, a slight deterioration from July, when RPks were down 53 percent. September so far appears to be flat from August, suggesting the recovery is stalling, IATA said. “But challenges remain, September bookings indicate a deterioration in international recovery,” Walsh added. “That’s bad news heading into the traditionally slower fourth quarter.”

Further bad news: The economic recovery worldwide appears to be stalling as well, IATA said. Supply chains worldwide are strained. Labor shortages plague countries around the world. Vaccines offer hope, but vaccine resistance is stalling recovery in several countries, including the U.S. And a note to the future: Vaccination rates in some regions, like Africa, remain very low, potentially signaling that the Covid pandemic may not end any time soon as long as community transmission remains potentially high. The continuing uncertainty makes it very difficult to plan capacity, which remains 46 percent below 2019 levels.

On the more positive side, international traffic continues to grow, although from a very low base. International traffic has grown for six consecutive months but was still 69 percent below 2019 in August. Europe leads the way, due to its high vaccination rate. Travel between North and South America is showing promise and traffic now is only 14 percent below 2019, IATA said.

Madhu Unnikrishnan

In Other News

  • Delta and JetBlue Airways both unveiled new sustainable aviation fuel (SAF) offtake deals last week — deals that show just how far the industry still has to go to transition away from Jet A. Delta will take 250 million gallons of blended SAF from Aemetis and JetBlue at least 670 million gallons of blended SAF from SG Preston under the separate 10-year agreements. However, based on each carrier’s 2019 fuel usage, Delta’s deal only amounts to 0.5 percent of its annual need and JetBlue’s at least 8 percent. The U.S. airline industry is pushing for federal subsidies or tax breaks for SAF to help jump start the nascent sustainable fuel industry.
  • Korean Air Chairman and CEO Walter Cho kept to the script during an Aviation Week webinar last week. The airline’s merger with Asiana is proceeding well with regulatory approval expected by year-end, followed by two years — or until 2024 — of integration work. That integration will include streamlining the combined fleet of nearly every Airbus and Boeing family on the market, including the A220, A330, A350 and A380, and the 737, 747 and 787. “There isn’t an easy solution,” said Cho on the fleet question, adding that they will select the “most efficient and cleanest airplane[s] we can operate.” One thing is clear, Cho reiterated his view that the A380 will leave the Korean Air fleet in roughly five years.
  • China’s bankrupt HNA Group is moving forward on its restructuring with plans to consolidate its 11 airline brands, including Hainan Airlines, into a single carrier, according to a Shanghai Stock Exchange disclosure. Other brands include Air Changan, China Xinhua Airlines, Fuzhou Airlines, Guangxi Beibu Gulf Airlines, Lucky Air, Shanxi Airlines and Urumqi Air. The combined company would likely be comparable in size to the Big 3 Chinese carriers: Air China, China Eastern and China Southern.
  • Thai Airways has provided an update on its restructuring that aims to see it emerge from the crisis a financially healthy carrier — something it was not even before Covid-19 hit. The airline has rejected 20 aircraft lease or maintenance agreements, and sold roughly a third of its stake in budget carrier Nok Air for Thai baht 279 million ($8.3 million) in proceeds. In addition, the carrier repaid Thai baht 1.2 billion in outstanding debt and interest during the three months ending September 14. Thai Airways previously outlined plans to slash its fleet by selling 34 used aircraft and reduce its overhead as part of its restructuring.
  • ExpressJet is coming back to fight another day. The regional carrier, which ceased operations last year, early in the pandemic, will launch eight new routes throughout the West from Reno, N.V., branded aha! Initial routes from the Nevada city will begin next month and operate to: Pasco, Wash.; Bakersfield, Ontario, Eureka, and Fresno, Calif.; Medford, Eugene, and Bend, Ore. The aha flights will operate three times per week to each destination on Embraer ERJ-145s. Aha is aiming to be a hotel, lifestyle, and airline brand and will announce partnerships with hotels and resorts soon, the company said. The aim is to provide smaller cities in the West nonstop access to essentially a package Reno or Tahoe vacation. The Transportation Department restored ExpressJet’s certification in July.

Edward Russell & Madhu Unnikrishnan

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Sky Money

  • EasyJet completed its £1.2 billion ($1.6 billion) rights issue with 93 percent of the new 301 million new shares subscribed by close on September 28. The balance will be purchased by underwriters BNP Paribas, Credit Suisse, Goldman Sachs, Santander and Société Générale. “The success of this capital raise … will enable EasyJet to strengthen its balance sheet and accelerate its post-Covid 19 recovery plan,” said CEO Johan Lundgren. The airline will use proceeds to bolster its balance sheet and fund a broad expansion plan that aims to build on its strong strategic positions in Western Europe’s slot-controlled airports.
  • Finnair closed a $400 million sale-and-leaseback transaction with GE Capital Aviation Services and Pacific Investment Management Company for four Airbus A350s with 2017-2019 vintages. Proceeds from the deal will refinance existing debt and allow the airline to retire its €175 million ($204 million) undrawn revolving credit facility. Finnair Chief Financial Officer Mika Stirkkinen called the deal the largest “single aircraft financing transaction in the history of our company.”
  • Icelandair has financed its last three Boeing 737 Max jets under a sale-and-leaseback transaction with Aviation Capital Group. The deal covers two 737-8s and one 737-9 due in December and January 2022. Icelandair will operate 12 737 Maxes with the final three deliveries.
  • Latam Airlines Group has accepted a proposal from Oaktree Capital and Apollo Management for an additional $750 million in debtor-in-possession financing as part of its U.S. Chapter 11 bankruptcy restructuring. Chief Financial Officer Ramiro Alfonsín said the terms will generate “significant cost savings” for the group as it works towards exiting bankruptcy. The Tranche B funds are priced at either either 700 basis points over Libor or 600 basis points over an alternate base rate if interest is paid in cash quarterly; or 750 basis points over Libor or 650 basis points over an alternate rate if interest is capitalized and paid at maturity. The debt matures in April 2022 subject to Latam’s exit from Chapter 11.

Edward Russell

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Italia Trasporto Aereo (ITA) may not be flying yet, but it is committing to at least 59 new Airbus jets for its future fleet.

The new Italian carrier, which replaces Alitalia when it launches on October 15, has signed a memorandum of understanding with Airbus for 28 aircraft and with Air Lease Corporation for another 31 aircraft, ITA unveiled last week. The Airbus commitment includes seven A220 and 11 A320neo-family aircraft, and 10 A330neos. The ALC commitment includes 15 A220s, two A320neos, nine A321neos and five A330-900s, according to the lessor.

In addition, ITA plans to lease some 56 aircraft of the 105 planes that it aims to operate by 2025. This includes adding the Airbus A350 to its fleet from an undisclosed lessor. The airline will launch with 52 former Alitalia jets.

The selection of Airbus for ITA’s fleet needs was widely expected. The airline outlined plans to select a “single supplier” of aircraft in its business plan in July. And, given that Alitalia’s fleet is almost entirely Airbus save for several Boeing 777s, an ITA order was considered the European airframer’s to lose. The 777s may not even transfer to ITA with, for example, the airline planning to operate only A330s on flights to the U.S. from October — whereas Alitalia operates both A330s and 777s today.

ITA faces a precarious future despite its fleet plans. Discounters Ryanair and Wizz Air have used the Covid-19 crisis to expand their presence in Italy. Both have added new bases and expanded flight options throughout the country. And EasyJet has outlined growth plans that prioritize growth at Milan Malpensa and other key European airports. In addition, as a condition to its formation out of the assets of Alitalia, ITA was forced to divest slots at key airports, including Milan Linate and Rome Fiumicino.

And ITA still has many “i’s” to dot and “t’s” to cross in its plan. The carrier has yet to join a major alliance or select a strategic partner, though Italian daily Corriere Della Sera has reported that talks are underway with both Delta Air Lines and Lufthansa. The airline has said that selecting a partner is an important part of its strategy. Alitalia is a member of the SkyTeam Alliance and was previously part of the Air France, Delta, KLM and Virgin Atlantic joint venture between Europe and the U.S.

This is not to mention its name. The “ITA” label may prove to be just a placeholder as the carrier bids on the Alitalia name and brand. Bidding opened at €290 million ($335 million) earlier in September with the auction set to conclude on September 30.

Many of ITA’s 59 new aircraft will replace older models, most of which will be inherited from Alitalia. The airline targets 70 percent of its 2025 fleet being new generation aircraft, like the A220 and A330neo.

Alfredo Altavilla, executive chairman of ITA, said in a statement that the deals “jumpstart our business plan aiming at achieving our targets of a new environmental-friendly fleet with significantly lower operating and leasing costs.”

ITA expects the first new delivery from Airbus in the first quarter of 2022, and the ALC aircraft from the second half of that year. Deliveries will continue through 2025.

Edward Russell

Air France Takes First A220

Air France unveiled its first Airbus A220 on September 29, joining its European peers AirBaltic and Swiss to operate the only clean-sheet, medium-sized commercial aircraft on the market.

The Paris-based carrier has 60 A220-300s on order with the type set to replace the 49 Airbus A318s and A319s, plus some A320s, in its fleet by the middle of the decade. At that point, the 148-seat A220 will make up 60 percent — or more if the airline exercises any of its 30 options and 30 purchase rights — of Air France’s medium-haul fleet.

“This is the most technological and environmentally friendly airplane of its size,” Air France-KLM Group CEO Ben Smith said of the A220 at the Skift Global Forum earlier in September. These attributes will help the group reduce costs while also helping it meet its goal of cutting overall carbon emissions 15 percent — or 50 percent on a per passenger basis — by 2030 from 2005 levels.

On the cost front, the group targets 8-10 percent lower unit costs once capacity recovers from the pandemic to 2019 levels. These savings come in part from structural cuts — for example reducing overhead and making staffing reductions at Air France — and fleet changes in favor of newer, more efficient types. On the latter front, Air France has retired all four-engine jets, including its Airbus A380 superjumbos. The new A220s bring the airline 10 percent operating cost savings and 20 percent lower fuel burn compared to the A318s and A319s they replace.

And the A220 will not be the only next generation aircraft in the Air France-KLM fleet. The group is in talks with Airbus and Boeing over an order for up to 160 narrowbodies — likely either A320neo or 737 Max family models — for its KLM and Transavia subsidiaries. The group has no outstanding orders for either the neo or Max unlike nearly every other major airline in Europe.

“What is totally in our control is the decision on what aircraft we’re going to fly, which aircraft we’re going to replace and at what speed,” Smith said when asked about meeting Air France-KLM’s carbon goals at the forum. Other aspects, like sustainable aviation fuels, depend on both technological developments and government support to bring costs down.

Air France estimates that the A220 emits 20 percent less carbon than the jets it replaces.

The Airbus jet, formerly the Bombardier CSeries, has proven one of the more popular jets through the pandemic. The combination of the plane’s small size and high performance made it something of an ideal fit for airlines looking to cut capacity but continue to fly efficiently in the face of greatly reduced travel demand. AirBaltic accelerated the retirement of its Boeing 737s in favor of the A220 in 2020, and Air Canada, Delta Air Lines, and Swiss all relied heavily on the type while storing many other models in their fleet.

However, the A220’s strength during the crisis has not — yet — translated into sales for Airbus. The airframer only added 13 net orders to its backlog for the jet this year through August compared to 111 net orders for the A320neo family. And as Courtney Miller at The Air Current, citing the added operational complexities a new aircraft type poses for airlines hit hard by the crisis, put it last year: “Adding more aircraft of a known quantity is safe, whereas it takes a certain bravery for a management team to commit the company to a new fleet type.”

It was a big deal for Air France — long a stalwart Airbus narrowbody customer — to order the airframer’s Canadian-made model in 2019. And it’s notable for the airline to bet the majority of its European medium-haul fleet on the type before the first plane is even in the air. Though, it comes as less of a surprise, given that Smith is Canadian and was a long-time Air Canada executive before assuming the helm of Air France-KLM in 2018.

The first A220-300, registration F-HZUA, arrived in Paris at 10:07pm local time after a nonstop ferry flight from Montreal’s Mirabel airport on September 28, according to Flightradar24. The airline unveiled it in a ceremony at Charles de Gaulle Airport at 10:00am local time the next day.

Air France plans to operate six A220-300s by the end of the year. It will add another 15 to its fleet in 2022 with all 60 due by 2025. The airline will introduce the A220-300 on flights between Paris Charles de Gaulle and Barcelona, Berlin, Madrid, Milan Linate and Venice on October 31, and expand service to Bologna, Copenhagen, Lisbon and Rome Fiumicino through the winter.

Edward Russell

Fleet Briefs

  • Lufthansa has committed to four more Airbus A350s as part of its fleet transformation during the Covid-19 pandemic. The deal brings to 14 the number of widebodies ordered during the crisis, which has seen most of Lufthansa’s older four-engine jets retired. Lufthansa will lease the four new A350s from Avolon, Goshawk, and SMBC Aviation Capital, group CEO Carsten Spohr said at the IATA Annual General Meeting in Boston on Sunday. Deliveries will begin in 2022.”This is another puzzle piece of our fleet transformation,” he said.
  • Air Lease Corp. has been busy. In addition to its ITA deal, the lessor has agreed to lease Aeromexico six more Boeing jets. The agreement covers four 737 Maxes and two 787s with deliveries in the first half of 2022. The deal is subject to U.S. bankruptcy court approval. In April, ALC agreed to lease the Mexican carrier eight aircraft, including four 737 Maxes and four 787s.

    And to the north, ALC delivered the first of 13 737-9s to Alaska Airlines last week. The delivery, while not the first 737 Max for the Seattle-based carrier, is the first under the lease signed last November in the days after the U.S. Federal Aviation Administration re-certified the Max. The deal was the first of several by Alaska that will see it flying at least 93 of the type by end-2024 and making the Max the mainstay of its mainline fleet for years to come.
  • Not such a big mistake after all? Qatar Airways plans to return five of its 10 Airbus A380s to service by early November and the entire fleet in 2022 to meet resurgent demand, CEO Akbar Al Baker told Executive Traveller. Al Baker appears to be eating his words early in the pandemic when he described the superjumbos as the “biggest mistake” in the airline’s history.
  • SAS has signed a letter of intent to lease an undisclosed number of Embraer E195s. An airline spokesperson described the deal as a “short-term solution” to its mid-sized fleet needs that would allow it to accelerate the retirement of older Boeing 737s. They added that the deal is not finalized and SAS could still opt for a different aircraft.
  • Here’s a new one. Airlines leaning into cargo by adding dedicated freighters has been a theme of this pandemic. Think Air Canada, WestJet, and Mesa, just to name a few. But now we have a maritime shipping company joining in the fun. French shipping conglomerate CMA CGM, which operates the American President Lines among other shipping companies and is the third-largest maritime freight company in the world, is adding its own freighters. The company has ordered two Boeing 777 Freighters for its new CMA CGM Air Cargo subsidiary. The company already handles about 400,000 metric tons of air cargo per year. With its new 777Fs, however, that should go up, as each of the type can carry 102 metric tons. To put that in perspective, however, CMA CGA’s 542 container ships moved 21 million containers last year.

Edward Russell & Madhu Unnikrishnan

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State of the Unions

American Airlines and Southwest Airlines‘ pilots unions, the Allied Pilots Association (APA) and Southwest Airlines Pilots Association (SWAPA), have separately requested exemptions from President Joe Biden’s Covid-19 vaccine mandates the citing the “unique” health standards commercial pilots are held to under U.S. Federal Aviation Administration regulations. And if the exemptions are not granted, APA President Captain Eric Ferguson warns that the busy holiday travel season many airlines are betting on for a year-end boost may not be as smooth as hoped if pilots are out getting their jabs.

“We are not pro- or anti-vaccine, we are not anti-vaccine mandate necessarily as it pertains to everybody else but as it pertains to your job — you need to have the option to not get vaccinated,” Ferguson said in a podcast to pilots on September 24. APA sent its letter seeking the exemption to federal officials the same day.

SWAPA took a firmer line, with a spokesperson saying the union believes that “it is each pilot’s right to choose whether or not to get the vaccine.”

The requests come as Covid-19 vaccines have emerged as a new battleground in the travel industry. United Airlines came out early mandating vaccines for its staff and more 99 percent of its more than 84,000-strong workforce got their jabs by the September 29 deadline — including all by 20 unexempt pilots. Delta Air Lines has taken a more hands-off approach by not outright mandating vaccinations but adding a $200 monthly fee to employee health plans for those who do not get their shots. More than 82 percent of Delta’s more than 75,000 staff are vaccinated.

“Vaccines are a key part of a multilayered approach — which includes CDC recommended layered prevention strategies, such as wearing a mask — that is critical to the world’s recovery from this deadly virus and to protecting the airline industry’s path to economic recovery,” said Air Line Pilots Association (ALPA) President Captain Joe DePete in support of the vaccine mandate on September 29. ALPA represents pilots at Alaska Airlines, Delta, JetBlue Airways and United among others.

The Biden administration is pushing hard to get more Americans vaccinated against Covid-19. Despite an early global lead in vaccinations, the number of people in the U.S. getting their shots has plateaued while other countries that got a later start have pulled ahead. Almost 56 percent of Americans were fully inoculated against the virus as of September 28, though the rate was closer to 65 percent for those over 12 years of age, according to U.S. Centers for Disease Control and Prevention (CDC) data.

“We’ve been patient. But our patience is wearing thin,” President Biden said when he unveiled mandates for all federal contractors and businesses with more than 100 employees earlier in September. While the details of both mandates have yet to be finalized, most airlines — including American and Southwest — expect to be covered by one or both due to their size and importance of government travel contracts to their businesses.

In response to Biden’s orders, American CEO Doug Parker and President Robert Isom told staff on September 10 that they believe the airline will be covered by the mandates, and hope that “more and more team members make the decision to get vaccinated against Covid-19.”

An American spokesperson declined to say what percentage of the airline’s staff have their jabs. However, reports indicate that roughly 4,200 pilots out of its more than 13,400 cockpit crews are still unvaccinated.

Responding to questions over why United has achieved such a high vaccination rate compared to American, Captain Ferguson blamed the airline and told pilots that it was primarily the result of their poor safety net in terms of long-term disability benefits.

“The fear of loss is more powerful than the hope of gain. [For] our pilots, the fear of loss — and the loss of their medical certification on the backdrop of this pandemic — is greater,” he said. He pointed to American’s plans to invest in Gol and JetSmart in South America, as well as incentives to attract and retain pilots at its wholly-owned regional carriers as money that could be used to provide a better safety net for the airline’s pilots. Both comments suggest greater disagreements with American management than just the debate over Covid-19 vaccines.

A spokesperson for the United chapter of the Air Line Pilots Association said they view their long-term disability plan as lagging other competitors, and they are working on improving this. They added that 91 percent of United pilots were vaccinated before the airline mandated the shots in August.

Edward Russell

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Routes and Networks

When French Bee launched its Paris Orly-Newark flights in July, the Delta variant had yet to wreak its havoc on the U.S. Now, several months later, the leisure carrier is confident in the recovery enough to increase frequencies on the route and to resume its Paris-San Francisco-Tahiti flights, which had shifted its technical stop to Vancouver after the U.S. barred entry to most Europeans last year.

The San Francisco flights will restart in November, and the Newark flights, now three times per week, will go up to four weekly flights in December. This could flex upward if demand warrants, President Marc Rochet said.

The carrier expects demand to come roaring back when the U.S. reopens to Europeans in November, but its optimism is tempered by a measure of caution. The Biden administration announced its plans to lift most restrictions for vaccinated travelers but has yet to specify a date, other than the month of November. Most of the carrier’s sales originate in France or elsewhere in Europe, but French Bee has yet to see the same kind of surge in bookings that Virgin Atlantic and other carriers have reported. Rochet attributes this relative hesitance to the lack of details from the Biden administration on its plans. “There is a lot of clarity that is missing,” Rochet told Airline Weekly. “We will have a real peak when the clarity is there.”

But when that clarity arrives, Rochet said the demand will be “huge.” Demand first will come from visiting friends and relatives (VFR) traffic, followed by leisure travelers and students returning to universities abroad. “Business travel will be very low,” he said. “Our model based on economy [class] and premium economy will be strong.”

Since it launched the Newark flight, French Bee’s bookings mainly have come from VFR, inbound from the U.S. Traffic has mainly been one way, thanks to the travel restrictions. Since the bulk of French Bee’s demand has come from inbound VFR traffic, the carrier says most itineraries don’t end in Paris but continue on to destinations around the country. From the July 14 launch to September 28, French Bee carried about 20,000 passengers on the Newark-Paris route.

Inbound tourism demand is an area of potential growth for the carrier. Although it is well known in France, its brand recognition among U.S. travelers is low, Rochet said. “To be clear, we didn’t break even, and we didn’t make money,” he said. “Still, we are a bit satisfied with the result.”

The carrier has had time to build market share now that its much larger competitors — the U.S. network carriers, IAG, and Air France-KLM — have stepped back from their transatlantic dominance. Air France-KLM alone had 64 daily flights to the U.S. before the pandemic, Group CEO Ben Smith said at the Skift Global Forum in September.

“We recognize that Air France is a very strong competitor,” Rochet said. “My feeling is that they will not come back as they were in 2019 for a very long time.” Air France’s fleet of widebodies equipped with large premium cabins will be a liability for the carrier when business travel — now widely thought to recover only by 2024 — remains depressed. “It will be very costly for [Air France] to fly to the U.S. and not have that business-class revenue,” Rochet added. “Our product is better suited to the market and also is cheaper to operate, so we are very optimistic.”

New entrants in the low-cost longhaul market, like Iceland’s Fly Play and Norway’s Norse Atlantic, also do not trouble Rochet, because their focus is on Northern Europe and not on France. And even if they do offer connections or direct flights to France, Rochet is not worried. “We of course do not think we will have the whole market to ourselves,” he said. “It would be totally stupid and arrogant to think so.”

When the Newark flight launched, Rochet said the first few flights were almost entirely cargo. Freight remains an important revenue stream for the carrier, but it suffers from a lack of brand recognition among U.S. freight forwarders and shippers. Most of the carrier’s cargo on the Newark flights originates in France.

French Bee’s Airbus A350s can carry up to 16 metric tons of cargo, but the carrier has been averaging about 12 metric tons on the Newark flights. Part of this is the changing nature of air freight, fueled by e-commerce, Rochet said: Package freight is light but it occupies a lot of space for its weight.

The carrier’s fleet plans have changed slightly since the summer. Now, it expects to take delivery of its fifth A350 in December, instead of October. Its sixth A350 will arrive in June 2022. One benefit of the pandemic is that there are a lot of “cheap airplanes on the market, even A350s,” he said. “So we know we can get more if needed, but we are cautious people.”

Madhu Unnikrishnan

Route Briefs

  • Out with the new, in with the, uhh, newer? Allegiant Air, Delta Air Lines and United Airlines are all exiting some relatively new — one very new — markets. Allegiant is out of Cleveland, citing rising operating costs early in 2022, after nearly five years. Delta will drop Durango in October after just six months in the outdoors-oriented Colorado city. And United is calling it quits in Rochester, Minn. — a market long touted by CEO Scott Kirby as the exemplar of how the airline’s large regional jet cap makes it less competitive vis a vis American Airlines and Delta — also in October. Notably, all of the exits occur after air service protections under the federal coronavirus payroll support program sunset on October 1.
  • Lufthansa Group carriers Austrian Airlines and Eurowings are swapping several routes to streamline their networks. Austrian has taken over the Vienna-Hanover route from Eurowings to improve connections over its Vienna hub this summer. And Eurowings, the group’s budget arms, is moving on the Stuttgart-Graz route, as well as adding frequencies on Dusseldorf-Graz to support westbound connectivity. These are just some of the latest route map changes within the group that has also seen non-Lufthansa brands land in Frankfurt and Munich for the first time in years.

    Separately, Eurowings will add new service between Hamburg and Beirut from November 7. The route will be its third to the Lebanese capital after nonstops from Berlin and Düsseldorf.
  • Frontier Airlines is betting on the seemingly bottomless pit of sun demand to Cancun this winter. The discounter will connect the Mexican beach town with Baltimore/Washington, Boston, Detroit and Minneapolis/St. Paul in December, and with Columbus and Raleigh-Durham in January. With the additions, Frontier will serve 19 U.S. cities nonstop from Cancun.
  • Not Norwegian Air but at the same time Norwegian Air clone Norse Atlantic Airways outlined its initial U.S. service plan in an application for a foreign air carrier permit from the Department of Transportation last week. The long-haul low-cost operator plans to connect Oslo with Fort Lauderdale, New York Stewart and Ontario, Calif., from the Summer 2022 season that begins in March. A key caveat — and an unusual move on Norse Atlantic’s part — is the application comes before the receipt of an operating certificate from Norwegian officials. Norse Atlantic said it expects such a certificate by early November, though when have regulators behaved the way airlines want them too?
  • Ryanair will reopen its base in Cork, Ireland, this winter after a pandemic-related closure. The discounter will station two Boeing 737s at the airport with plans for 12 routes this winter and 20 next summer. Only two, however, are now: Cork to Birmingham and Edinburgh. Both new routes fill the gap left by the collapse of Stobart Air in June.

    Speaking of Edinburgh, Ryanair will also expand its base in the Scottish city with three new routes. Nonstops to Madrid, Palermo and Paris Beauvais begin in October and will operate through the winter.
  • WestJet‘s budget subsidiary Swoop is continuing its sun expansion with new service to the Dominican Republic in December. The airline will connect Toronto Pearson and Punta Cana twice-weekly from December 5.
  • Vueling is making a splash at Paris Orly with the 18 slots it received as part of a divestment by Air France-KLM. The IAG-owned discounter will add 28 new routes — almost all with less than daily frequencies — from Paris. New nonstop destinations include Asturias in Spain, Birmingham, Dublin, Edinburgh, Hamburg, Milan Bergamo, Nuremberg and Stockholm. Most of the routes begin in early November.
  • U.S. startup Avelo Airlines continues to adjust its map with plans for new service to Tucson this winter. The discounter will connect its Burbank base with the Arizona city from December 16.
  • American and United are adding partners in some of their newest markets. American has signed a codeshare with IndiGo to provide connections for its return to Delhi on October 31, and new service to Bangalore on January 4, 2022. No word yet on whether the new American-IndiGo tie up could turn into an equity partnership like the U.S. carriers recent deals with Gol and JetSmart in South America.

    And in South Africa, United signed a codeshare with Airlink that fills the gap left by struggling partner South African Airways. United added Johannesburg to its map in June, an addition that followed its first-ever service to South Africa with flights to Cape Town in December 2019. Airlink was previously a regional affiliate of SAA but went separate ways with the carrier before the pandemic.

Edward Russell

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Feature Story

Hiring challenges at regional airlines is a tale almost as old as the industry. That fact was on display at the Regional Airline Association (RAA) Leaders Conference in Washington, D.C., last week when executives from a wide range of carriers cited the issue as one of their most pressing challenges as the sector emerges from the Covid-19 crisis.

Cape Air President Linda Markham put the issue in perspective when she said the Hyannis, Mass.-based carrier has been working on the pilot shortage for at least 12 years. And the pandemic appears to have only made matters worse. “Because of all the furloughs and early retirements [at major carriers] we are hearing a huge sucking sound now. We have a problem with both pilots and technicians now,” she said.

Asked how staffing issues have affected Cape Air’s operations, Markham said the airline has had to make “tactical” schedule cuts across its map because of these issues. The airline operates a far flung network connecting small cities — including many under the U.S. government’s Essential Air Service subsidy program — with large airports in the Caribbean, New England, Midwest, and Montana. 

Pilot sourcing is a long standing issue for regional carriers. This really came to the forefront after new training and hour requirements — the “1,500 hour” rule — were implemented in 2013 in response to the fatal Colgan Air 3407 crash in 2009. According to a recent Oliver Wyman report, after an abundance of pilots in 2020 and 2021, North American carriers will face a shortfall of nearly 10,000 pilots by the beginning of 2022 and that number will only rise as the decade continues. Regional airlines, as the entry point for most would-be pilots into the industry, bear the brunt of that shortfall.

But the pandemic has only exacerbated other labor challenges, as with maintenance technicians, for the sector. Empire Airlines, which operates turboprop freighters for FedEx, CEO Tim Komberec said airlines face all kinds of new competition for graduates from airframe and powerplant — or A&P — schools, including from Otis Elevators and the growing wind energy sectors. He and other airline executives are focused on growing the pipeline of trained technicians — a tough lift in an economy that increasingly favors white-collar work over skilled trade jobs — to meet their future needs. Though segment giant SkyWest Airlines has a unique approach to the problem: “We’re having to identify where there are pockets of A&Ps and we’ll put a maintenance base there,” said CEO Chip Childs.

Like everywhere, entry-level ground staff positions are the hardest to fill. This is true across the airline industry — and the U.S. economy broadly — with incoming Southwest Airlines CEO Robert Jordan saying last month that the shortage is so bad in the airline’s Dallas home that he received an application for a job at a local Whataburger restaurant when he picked up a recent order. None of the regional airline executives suggested that they could begin handing out applications onboard flights. At least not yet.

One thing a labor shortage does is drive up costs. And that makes operating profitably a challenge, especially for notoriously thin margin regional airline businesses. This fact, plus the pending retirement of 50-seat regional jets from U.S. fleets and the relentless drive towards greater scale and efficiency, has Republic Airways CEO Bryan Bedford anticipating a further culling of regional players — perhaps to half the number there are today — over the next decade. Asked how this shakeout will occur, he expects this to occur through attrition as smaller, weaker operators close their doors — as Compass Airlines, ExpressJet Airlines and Trans States Airlines did in 2020 — with their flying redistributed among the remaining players.

“I see the industry splitting where all of a sudden small is beautiful again,” said Bedford. By this, he sees “fewer, extremely large-scale players” and more “niche-y small guys,” citing Cape Air as an example of the latter.

Asked for her response on Bedford’s comments, Markham said Cape Air has “always known that.” Indeed, the airline has been involved in some of the more interesting developments in the regional space. In addition to being one of the first to address the pending pilot shortage 12 years ago, Cape Air is the only operator today that has hands-on experience working with an OEM developing an entirely new airframe. That collaboration with Italy’s Tecnam produced the nine-seat P2012 Traveller that began revenue flights with the carrier in February 2020. Cape Air flies 25 Travellers today and anticipates operating 30 by year-end.

Cape Air’s experience is expected to come in handy as the flurry of proposed electric aircraft enter the market. The airline was the first to commit to an electric aircraft — Eviation’s nine-seat Alice — two years before such commitments became popular at the Paris Air Show in 2019. And Tecnam is using the Traveller as the platform for the electric P-VOLT that it’s developing with Rolls Royce. Cape Air and Widerøe among the first customers for the new Tecnam model. The largest in-development electric model is Heart Aerospace’s 19-seat ES-19 turboprop that has commitments from Finnair, Mesa Airlines and United Airlines.

That’s where Bedford’s future “niche-y small guys” sit: At the intersection of the emerging electric vertical takeoff and landing (eVTOL) aircraft segment and future small electric propeller aircraft, like the Alice and P-VOLT. eVTOLs are, for now, considered essentially air taxis with seats for typically four people flying high-frequency, short flights connecting airports with nearby city centers and suburbs — think Irvine to LAX in Southern California. The sector has created so much buzz that even Airbus is getting in on the action with its own CityAirbus model. And many expect the electric propulsion technology developed for eVTOLs and small props to be the basis for future electrified large passenger aircraft.

The big question mark around electric aircraft is their timing. It easily takes 5-10 years for an entirely new aircraft to move from the drawing board to revenue passenger service, and that’s with standard jet fuel-powered engines. No one knows how long it will take for global aviation regulators, not known for their speed, to approve this new generation of electric engines and then the airframes they will power. Some eVTOL developers, including Archer Aviation and Joby Aviation, say their aircraft will be carrying passengers by mid-decade but few expect those timelines to hold. Asked at the conference when the Alice or P-VOLT could enter revenue service, Cape Air Senior Vice President James Goddard — a driving force behind the drove Traveller development — would not provide a firm date saying he defers to “smarter people than me.”

“It’s a long ways off before you’re going to take 76-passengers in something that’s not powered by Grade A jet fuel,” said Childs. He expects electric large regional jets, like the Embraer E175s that SkyWest flies, to be at least 10-15 years away.

Edward Russell

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