Pilots at 2 of American Airlines' regional airlines will see a massive pay increase

Two of the regional carriers owned by American Airlines are hiking pilot pay in a way that could set off shockwaves throughout the industry.

New-hire first officers at Envoy Air and Piedmont Airlines will soon make $90 an hour, an unheard-of figure in an industry where, until this week, the top starting salary for an entry-level first officer was $52.98. That was for pilots at Endeavor Air, the regional airline wholly owned by Delta Air Lines, which has long been considered the industry pay leader.

First-year captains at both airlines will make $146 per hour. That's an increase from $78 at Piedmont and $86 at Envoy.

While some details of the accompanying contract agreements — which are between Envoy and Piedmont management and bargaining units represented by the Air Line Pilots Association — are permanent, the big pay increases are temporary and run through August 2024. A smaller pay increase that is in the deals is permanent.

Want more airline-specific news? Sign up for TPG’s free biweekly Aviation newsletter

At Piedmont, the deal came together swiftly. Management and ALPA began talking on Wednesday afternoon, and had inked a deal by Friday evening, CEO Eric Morgan told TPG in an interview.

"It's very simple right now: Our goal here was to make the pilot pathway at American the best in the industry," Morgan said.

The move comes at a time when regional airlines are having difficulties recruiting pilots due to what most in the industry consider to be a pilot shortage. Simultaneously, regional pilots are leaving their airlines in droves because mainline carriers have ramped up hiring significantly. On top of replacing pilots who are retiring at the mandatory age of 65, carriers must also replace pilots who took early retirement packages during the onset of the COVID-19 pandemic, when demand cratered and airlines had an urgent need to cut costs.

Morgan said that he sees evidence of the pilot shortage firsthand on a daily basis: All he has to do is look out his window at the airline's headquarters at Maryland's Salisbury Regional Airport (SBY) on the state's Eastern Shore and see parked planes.

"Our most expensive asset is sitting on the ground because we don't have pilots to fly," Morgan said. "So that really sums it up."

Piedmont management has a good relationship with its ALPA bargaining unit, Morgan said. ALPA's national office has strongly denied that there's a pilot shortage and has instead pointed to the low pay that regional pilots historically earn.

"I mean, they see our airplanes being parked. They look at their bid lines," Morgan said, referring to pilots' schedules. "So I don't know how you, on one hand, say there's not a pilot shortage."

Earlier this month, American CEO Robert Isom said that the carrier has had to park 100 regional jets due to the pilot shortage, with an implication that most of those were 50-seat Embraer 145s operated by Envoy and Piedmont. Envoy also operates larger Embraer 170 and 175s, while the Embraer 145 is the only type of aircraft that Piedmont operates.

Generally, pilots enjoy significantly higher pay and a better quality of life at mainline carriers than at regional airlines. The three regional airlines owned by American — PSA Airlines is the third — participate in what's known as a flow-through program to mainline, meaning that pilots there are automatically offered a job as an AA first officer when it's their turn on the seniority list. First-year first officer pay at mainline American Airlines is also $90, meaning that Envoy and Piedmont pilots will actually see a short-term pay cut when they flow through. Additionally, if they don't flow through within five years, pilots at both airlines will be owed top-level captain pay — $213 per hour — for the remainder of their time at the regionals.

More: American Airlines parks 100 regional jets due to pilot shortage, CEO says

That aspect of this agreement is essentially an admission that pilots are leaving for other carriers outside of American before their flow dates – moves that come as Delta and United look to hire from American’s regional units to try to solve their own staffing issues while not depleting their own regional ranks. One joke oft-told among regional pilots is that the best way to get hired by United or Delta is to be in American's flow-through program.

The biggest winners of the new deal are line check airmen: pilots with special training who help train and observe fellow pilots fly. Those pilots have been leaving at the fastest rates, as their enhanced resumes make them particularly attractive to mainline carriers, Morgan said.

At both airlines, line check airmen will now receive $427.50 per hour when conducting training.

"It is a strategic move to make sure that we can keep our training and qualification process moving and not have to put a limit on how many new pilots you can train and qualify because you don't have enough line check airmen to get in the seat with them and fly the line and qualify them," Morgan said.

For now though, the big question is how many other regional airlines can — and will — raise pay to match that of Envoy and Piedmont, as pilots at those two airlines begin to get compensated at a rate that approaches pay at mainline airlines.