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Strapped for pilots, Republic asks partners to reduce flights

May 27, 2015

Republic Airways Holdings Inc. is so short on pilots that it’s asking major-airline partners to reduce its summer flying schedule.

The situation will mean less revenue for Indianapolis-based Republic, the company has said, and it could mean a noticeable lack of seats available from airports like Indianapolis International, where about 60 percent of flights are operated by regional contract carriers such as Republic.

“Essentially it would be less capacity,” said James Clark, president of the International Brotherhood of Teamsters Local 357, the union that represents 2,300 Republic pilots. “It could actually change the schedules.”

Republic CEO Bryan Bedford told investors earlier this month that crew-related flight cancellations rose throughout the first quarter and continued at a high level in April and May. The labor shortage will reduce revenue by an estimated $15 million this year, the company said.

Bedford said the solution is to bring an end to protracted contract talks with the pilots’ union. The two sides have been meeting seven days a week since April and hope to have a tentative agreement in the near future.

Republic has been in off-and-on talks with the pilots’ union since 2007 and reached a tentative agreement last year, only to have it rejected by 85 percent of the pilots.

“There’s really no point in speculating as to whether or not our ongoing labor dispute is driving elevated levels of crew cancellations,” Bedford said during a May 8 conference call. “Regardless, we’re convinced that the most expedient way to get back to our historically high levels of performance is to reach a successful outcome at the bargaining table.”

In the meantime, Bedford said the company asked its major-airline partners to reduce its schedule in order to avoid disappointing customers. Republic said it's uncertain at which airports those schedule reductions will appear, since that's up to the major airlines.

Republic has a new executive team leading talks with the pilots. Chief Operating Officer Wayne Heller retired early this year, and he’s been replaced by human resources Vice President Matt Koscal and Chief Financial Officer Tim Dooley.

"It matters who's at the table," Clark said.

Clark said the union and Republic executives have been meeting almost nonstop since April. “This is a massive amount of effort on both parts," he said.

Although Republic executives believe the union thwarted their effort to fill gaps in crew availability, Bedford told investors that he won’t seek a legal remedy.

“If we go back over the tenure of the previous leadership team, it was very adversarial,” Bedford said during the conference call. “We spent a lot of time in court, and honestly, we generally prevailed in those arguments. We’re trying to approach this with a new spirit of engagement and cooperation. And we don’t have any intent to seek a legal process to resolve this.”

The issue behind the canceled flights, Bedford said, is that Republic does not have the ability under the current contract to force junior pilots to work on their days off. Instead, the company uses incentive pay to encourage pilots to fill the gaps.

When the company notified the union that it intended to activate incentive pay, the union responded by telling pilots not to pick up open slots. Clark said the union’s instruction to its members was appropriate because at this stage of the negotiation, which is overseen by federal mediators, neither side is supposed to change its behavior.

Regional contract carriers like Republic face pilot shortages that appear to be driven by significantly lower pay than at the major airlines.

Republic’s net income was $6.4 million in the first quarter, down more than 50 percent from the prior year. Earnings per share were 13 cents, half as much as a year ago.Total revenue rose 1 percent, to $341 million.

Company shares were up 7 cents Wednesday morning, to $10.33 each, but have fallen nearly 30 percent since the beginning of the year.

 

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