Tuesday, February 11, 2014

Pilot Shortage Hits Regional Carrier Republic: Airline Won't Seek Extensions on Some Aircraft Leases

The Wall Street Journal
By Everdeen Mason

Feb. 11, 2014 11:13 a.m. ET

Republic Airways Holdings Inc. said it will no longer look to extend the leases on 27 its ERJ aircraft due to a lack of qualified pilots, a move that will weigh on its profit this year.

The regional airline company said in a regulatory filing Tuesday that it has 41 ERJ aircraft with leases set to expire this year and intended to seek extensions. But because of the congressionally mandated rule that requires pilots to have 1,500 hours of experience, there aren't enough qualified pilots and it won't seek extensions for all the aircraft.

Republic's shares declined sharply on the news, also dragging down fellow regional carrier SkyWest Inc.

A shortage of qualified pilots has hit U.S. airlines sooner and more severely than expected, leading the airlines to accelerate hiring and cut some service. Regional airlines, which offer meager starting pay and tend to lose pilots to major carriers, have so far been affected the most, but that is having knock-on effects at the big airlines, which rely on their smaller cousins to ferry passengers on shorter routes.

As it recently announced planned cutbacks at its Cleveland hub, United Continental Holdings Inc. said its regional-airline partners are beginning to have difficulty flying their schedules due to reduced new-pilot activity.

In a research note, analysts at Cowen & Co. said they think the regional airlines will continue to struggle to find pilots due to the new rules, and many of the mainline carriers will hire away pilots to meet their capacity needs.

For its part, Republic said the 27 ERJ aircraft will be removed from fixed-fee service this year, hurting its pre-tax income between $18 million and $22 million. Additionally, the company will hire about 750 fewer employees as a result of the change.

Republic, based in Indianapolis, owns Chautauqua Airlines, Republic Airlines and Shuttle America. Combined, the company operates a fleet of 230 aircraft and offer flights to more than 110 cities in the U.S., Canada and the Bahamas.

SkyWest is due to report its fourth-quarter results Thursday.

Source:   http://online.wsj.com

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