The pilot shortage hampering the airline industry is largely driven by overaggressive regulatory measures, Mesa Air Group (NASDAQ:MESA) CEO Jonathan Ornstein told SeekingAlpha in an interview.
Ornstein’s airline grabbed headlines in late September by instituting a training program that included the purchase of up to 104 new training aircraft and offers qualified pilots up to 40 hours of flight time each week with flight benefits and priority status for employment as a First Officer at the airline. The program was touted as a private sector solution to a problem created by regulation.
The main problem at hand, according to Ornstein, is the FAA’s requirement of 1,500 hours of flight time to be granted an Airline Transport Pilot certificate. Ornstein noted that the rest of the world does not adhere to such a strict standard, with most other regulators across the globe requiring just 250 flight hours for pilot certification. Even for major carriers abroad that typically institute stricter standards, the 1,500 hour rule dwarfs requirements. For example, Australia’s QANTAS airlines advertises a requirement of just 700 hours of total experience.
Ornstein, therefore, lamented the FAA’s decision to reject Republic Airways’ proposal to cut the required training time.
“We’re in a shortage now that has been entirely created by really poorly designed, poorly executed, and poorly thought-through government regulation that has nothing to do with safety and everything to do with money,” Ornstein said. “As a result we are short thousands of pilots and most regional airlines are flying at half capacity.”
He added that the regional airlines are under particular stress given they are “at the bottom of the food chain” in terms of pilots. As such, they have had to double wages for pilots even prior to instituting a new program for pilot training in pursuit of the 1,500 hour minimum that Ornstein considers “absurd.”
Raymond James recently cut its rating on Mesa Air Group (MESA) and SkyWest (SKYW) to a Sell-equivalent citing the spike in pilot wages as the impetus for the shift. Ultra low-cost carriers like Spirit Airlines (SAVE) and Frontier Group (ULCC) are also under pressure given their reliance on low fares that are growing less tenable amid surging labor costs.
Additionally, many routes normally trekked by regional airlines are simply becoming uneconomic, in Ornstein’s view. This is an issue for not only the airlines, but consumers traveling from the smaller cities serviced, he noted. Airfares in the US increased 33.4% in August compared to 2021 on an unadjusted basis.
Reinforcing his view on regional capacity cuts, regional carrier SkyWest (SKYW) filed to trim 29 routes from its schedule earlier this year prior to DOT intervention. Meanwhile, American Airlines (AAL) said it will cut service to four smaller cities this month due to a shortage of pilots, adding to earlier capacity cuts. Meanwhile, United Airlines (UAL) has recently pushed for more flights from JFK Airport to focus on a major hub while cutting service to smaller markets like Texarkana, AK and Flagstaff, AZ. Both Delta Air Lines (DAL) and American have even moved to offering buses in lieu of short-haul routes given the shortage and adverse economics of regional routes.
On a more positive note, Ornstein told SeekingAlpha that Mesa has already received “hundreds of applications” to its pilot training program unveiled on Thursday.
“There are a lot of kids out there that have the 250 hours for their commercial license that are struggling to get to the 1,500 hour requirement by towing banners, crop-dusting or other activities that do not really improve their skills,” he said. “What we’re doing is providing a more concentrated timeline where they can accelerate their entry into the industry.”
He expects the program will offer some breathing room for the airline in the longer term. Nonetheless, he remained pessimistic on the pilot shortage problem being solved in the near term.
US Airlines: Delta Air Lines (DAL), American Airlines (AAL), United Airlines (UAL), Southwest Airlines (LUV), Spirit Airlines (SAVE), Alaska Airlines (ALK), JetBlue Airways (JBLU), Sun Country (SNCY), Frontier Group (ULCC), Hawaiian Airlines (HA), SkyWest (SKYW), Allegiant (ALGT), Mesa Air Group (MESA).
Read more on President Biden’s recent comments criticizing US air carriers’ capacity cuts.