American Airlines made the wrong bet by doubling regional pilot pay: Analyst

American Airlines may be regretting its decision last year to unilaterally hike regional pilot pay to historically high levels, according to Raymond James analyst Savanthi Syth. The Fort Worth, Texas-based carrier fundamentally changed the economics of regional flying when it raised pilot pay at its three wholly-owned affiliates — Envoy, Piedmont Airlines, and PSA Airlines — to nearly the level earned by its own pilots. The move doubled the cost of regional operations, which have long been a lower cost capacity option for major airlines like American to serve small cities and, at least as recently as October, had yet to solve the pilot staffing issues that American’s affiliates face. “American made a bet last year in June, and the bet went wrong,” Syth said at the U.S. Transportation Research Board Annual Meeting in Washington, D.C., on Monday. Rather than siphoning away the available pilots from competitors to Envoy, Piedmont, and PSA, other carriers have matched the pay rates and prompted an industry-wide shift in regional airline economics. Mesa Airlines was the first to match in August and has been followed by much of the industry, including heavyweights Horizon Air, Republic Airways, and SkyWest Airlines. “Increases to wholly-owned pilot pay and other investments to support the operation are near-term investments that will drive long-term value,” an American spokesperson said in response to Syth’s comments. They added that the airline will continue to be “aggressive in tackling the regional pilot constraints affecting the US airline industry.”<br/>