In their earliest stages, contract talks between United and its pilots may have already hit a snag after President Scott Kirby said Tuesday that his plan to boost capacity and restore lost flying is “entirely dependent” on relaxation of the contract’s scope clause.
In a letter sent to United’s 12,500 pilots early Wednesday morning, Todd Insler, president of the United chapter of the Air Line Pilots Association, said the call for relaxation represents a “distraction.
“Despite the public statements from the company about needing ‘scope relief,’ they have the ability to add 76-seat aircraft under current [contract] language,” Insler wrote. “No relief is needed.”
United “can add 76-seaters tomorrow with no restrictions if they are flown by mainline pilots,” he said. “We have done the math and know that mainline United pilots can deliver the current 76-seat product with better economics, improved reliability and with a superior customer experience for our passengers, just as we do on our current fleets. “
Moreover, Insler said, the number of 76-seaters flown by regional pilots could also increase if United were to add more small narrow body aircraft, such as the Bombardier CS 100, because a contract provision specifies that 76-seaters can account for a percentage of the fleet of small narrow bodies. United does not currently fly any small narrow bodies.
Typically, scope clauses restrict the number and size of the regional aircraft that can be flown by a mainline carrier or its regional partners. Under the existing contract, United can fly up to 253 regional jets with 76 or fewer seats.
The contract becomes amendable Jan. 2, 2019; Talks started early. The United chapter of the Air Line Pilots Association represents about 12,500 pilots.
Kirby shocked Wall Street in January when he declared during the United earnings call that the carrier will grow capacity by 4% to 6% in each of the next three years as it pursues a strategy of restoring hub capacity that it gave up following the 2010 merger with Continental.
United shrunk hub capacity, particularly in its mid-continent hubs of Chicago, Denver and Houston, at a time when rivals American and Delta grew their hub capacity. The strategy placed United at a financial disadvantage that is evident in lower margins and lower revenue per available seat mile
Speaking Tuesday at the JP Morgan transportation conference, Kirby said he is intent on “driving higher connectivity and revenue quality” by providing more capacity from cities such as Columbia Mo., and Rochester Minn. to United hubs. Such routes can only be efficiently served by 76-seat regional jets, he said.
“This is how we will grow the mainline,” Kirby said. But “we have [fewer] 76-seat aircraft than American Airlines. If we’re trying to fly a 50-seat product to Rochester, and competitors are flying 76 seaters into Minneapolis or Chicago, we will lose that battle.”
Kirby said adding 76-seaters is a “win-win” because feeding the mainline creates better opportunities for mainline pilots, but he noted, “I get why our pilots are really nervous about this – if I were a pilot, I’d be really nervous about it.”
In the days when United was shrinking, he said, prior management replaced mainline flights on routes such as Newark-Atlanta and Dallas-Chicago with regional flights. Pilots “watched as RJs came in and took over markets,” he said.
Chief Financial Officer Andrew Levy added, “We have very productive relations with our pilots. We’d like to find something that works for both of us. We do want to fly larger gauge regionals instead of 50 seaters.
“It will take time for that to actually happen,” Levy said. “The first step is to get to a point where we see eye to eye with ALPA.”
In 2014, during contract talks with pilots at American Airlines, where he previously worked, Kirby also sought scope concessions. The reaction from American pilots then was similar to the reaction from United pilots today.
“Scope is a religious issue to pilots,” said Dennis Tajer, spokesman for the Allied Pilots Association. “It’s so fundamental for our pilots that Mr. Kirby’s persistent scope concession requests almost undermined the trust and culture change he was trying to promote.”
In a note issued following Kirby’s presentation Tuesday, Wolfe Research analyst Hunter Keay wrote, “Kirby reiterated his belief UAL will obtain scope relief from pilots in a win-win scenario.
“We are more skeptical that will happen,” Keay said. “Technically speaking UAL doesn’t need scope relief to execute its strategy, but the path is probably more difficult without it.”
