Editor’s Note: The original version of this post included American opportunity based on 965 aircraft in mainline fleet. The scope clause is based on narrowbody aircraft only, so it has been updated using the 839 narrowbody number.
I hope you enjoyed your one week break from me talking more about American’s small-city focus, but there’s so much more to talk about. Today, I want to get into American’s secret weapon, the pilot scope clause, and why it is what allows the airline to focus on small cities more than Delta or United.
Every pilot union has negotiated rules with the airline to limit just how much flying can be outsourced. There are rules governing codeshare partners big and small, mostly to prevent ridiculous abuses like when United hired Aer Lingus to fly from Dulles to Madrid. This was in 2010 at a very different United. It would never try this today, but pilots learned the hard way that this kind of thing needs to be in writing.
The most important fence has tended to be on the small end. Over the years as airlines developed regional partnership, you saw a lot of 19-seat turboprops buzzing around which didn’t particularly concern mainline pilots. But in the 1990s when regional jets came out, mainline pilots sounded alarm bells. Eventually, the three remaining legacy network carriers all settled into scope clauses that have governed what can be outsourced at the small end of the spectrum. Those haven’t changed in several years.
Delta came to agree with its pilots on a structure that limited outsourced flying by aircraft size. There are weight limits and other restrictions, but those don’t matter for the point of this discussion. What matters is this:
- no meaningful limit for 50-seaters and smaller
- 102 aircraft with 51-70 seats
- 153 aircraft with 71-76 seats
- +70 aircraft with 71-76 seats if Delta acquired a small narrowbody at mainline
Delta did take on the Boeing 717 and now the Airbus A220 at mainline, so it got those 70 extra airplanes. United took this exact scope clause as its own, but since United never ordered small narrowbodies, it remains with a 153 aircraft limit in the 71-76 seat category.
American was the last one to adopt its current limits, and it is completely different than what Delta and United did:
- total outsourced regional aircraft cannot exceed 75 percent of the size of the mainline narrowbody fleet
- no other limits up through 65 seats
- outsourced regional aircraft from 66-76 seats cannot exceed 40 percent of the size of the mainline narrowbody fleet
This is a lot more generous, so I wondered if it would stick. But it survived the last round of negotiations. That means American gets to keep this advantage going forward, and that is one reason it must like this small city plan. It can fly a lot more regionals than either Delta or United ever could, so it is defensible if there is money to be made.
What does this really mean in practice? Well, let’s take a look.
Data via Cirium
On the larger end, Delta and United are both maxed out. American is already significantly larger than Delta and it can still add another 50, assuming a mainline narrowbodyfleet of 839 airplanes, a number that will certainly grow. Delta may not have as many, but remember that it does have a large and growing fleet of smaller narrowbody aircraft in the mainline fleet. It’s United that has the fewest airplanes below 120 seats, but it wants bigger airplanes to feed its big city hubs.
On the smallest end, Delta has finished retiring all of its 50-seaters. American still has a fair number between Air Wisconsin and Piedmont, but it says they will be gone by the end of the decade. Meanwhile, United still has an enormous number, including 35 CRJ-700s that have been converted to the 50-seat CRJ-550. It has plans to nearly double that number, something that may or may not actually happen.
The most interesting space is in the mid-range regional world, United is maxed out and Delta appears to be about 10 aircraft shy. It has some airplanes parked right now, so this could be a pilot issue that has yet to be fully restored, but Delta is basically out of options. It doesn’t seem to care and is happy with the fleet it has. United is focused on getting big. That leaves American.
American has fewer seats on these airplanes, because it has that unique scope clause that allows a huge number of 65-seat airplanes. If it maxed out the 76-seaters and had 335 of them, it could still have 294 of those 65-seaters. That’s in addition to the 98 50-seaters. If it gets rid of those, it can add them to the 65-seat group.
In other words, American can create a virtual army of regional aircraft… if it can find them. The 76-seaters are no problem to source, and as we know, the airline has just bought some. It purchased 90 Embraer E175s with 43 more purchase rights. But the smaller aircraft are more of a challenge.
The best 65-seat airplane out there is the CRJ-700. It’s meant to have more seats, but as I understand it, trip costs are 6-8 percent below the Embraer 170/175 or even the CRJ-900. With so few seats onboard, that can make a real difference in seat costs.
The problem with the CRJ-700 is that there aren’t all that many left. As you know, the airplane was built by Bombardier, but it isn’t being made any longer. Bombardier sold the business to Mitsubishi, but Mitsubishi has no interest in making airplanes either. So what’s in the market is all there is.
Of the roughly 250 airplanes out there today, American already controls 140 of them between PSA and SkyWest. United controls another 74 with its GoJet CRJ-550 program. Some of those aren’t yet converted, but they’re under United’s control. And I can’t imagine United would have any interest in letting those go knowing that they’d just end up with American. Delta has another 17 of them.
SkyWest does have a few more flying in prorate service that it could move over to American, but that’s really about it. American’s only other option to significantly grow that fleet is to get an Embraer 170/175 and outfit it very lightly.
Flying those airplanes at these high pilot salaries with few seats can get very expensive very quickly. American likes the idea of these small cities, because nobody else is competing for them and the fares are higher. That may work, but it’s unclear just how much demand even exists in these markets that nobody else cares about. It’s a risk… in more ways than one.
The long term threat here is to American’s pilots. American loves to talk about small cities these days, and that is going to be a lot of outsourced flying. It also talks about how its widebody fleet is going to remain smaller, and the airline will rely heavily on its joint venture partners. Again… it’s outsourced flying. There may be ample opportunity to fly narrowbodies around North America along with some limited Transatlantic growth on the A321XLR, but pilots like widebodies and they won’t be getting many of them.
Fortunately for American, the pilot contract was just settled in summer 2023 for four years. It’ll take another couple years beyond that before anyone would expect to see another contract anyway. So American can try this strategy now with short-term impunity. By the time the next contract comes up, this strategy may be long gone anyway.
In the meantime, American is going to try to make this push, because it is in the unique position of being able to do so while Delta, United, and yes, Southwest, can’t even touch it… not that they want to.
