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American Airlines Needs to Deal With Regional Pilot Pay Issues, Says Lee Moak

DALLAS  ( TheStreet) -- American Airlines (AAL - Get Report) needs to squarely face up to the problems of the regional airline industry, and it needs to start by reopening talks with the Envoy pilot group, said Lee Moak.

"Envoy management needs to come back to the table," said Moak, president of the Air Line Pilots Association, in an interview. "I believe that there is a deal there. I'm confident we can continue to work and get a deal that meets the strategic concerns of Envoy pilots as well as the operational needs of Envoy."

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ALPA "is determined," he said. "We never give up."
 
A round of talks between Envoy pilots and the company ended last week, with no new contract agreement, after the pilots sought to forestall American's placement of new 76-seat Embraer E175 regional jets with another regional carrier.

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American spokesman Casey Norton said Tuesday that "despite repeated efforts, we haven't been able to reach agreement with the Envoy pilots and have had to move on with different plans for our operations. No further contract discussions with the pilots are expected until their current contract becomes amendable in 2016."

The problem with the regional industry, Moak said, is falsely perceived to be a pilot shortage, when in reality it is a pay shortage. Starting annual pay ranges between $14,616 and $21,600 at the 10 regional carriers with the lowest starting salaries (Envoy is not among the 10), according to a recent ALPA survey.

The root cause of the pay shortage is that the mainline carriers don't pay the regional carriers enough to fly for them, Moak said. "The regional carriers -- Republic (RJET) , Mesa, Trans States, the wholly-owneds -- all undercut each other in their air service agreements" with mainline carriers, he said. "They don't have a lot of room in those contracts. (Wholly owned regional carriers are owned by major airlines.)

"What they need to do is to go back to the (mainline) brands and say 'we need to renegotiate these deals,'" Moak said. "The brands need to take ownership."

Moak said regional carriers such as Envoy need to provide two things -- robust flow-through agreements enabling movement to mainline American for all pilots who choose to move, as well as a career path for pilots who wish to remain. "Envoy pilots are flying the same passengers American flies," he said. "A typical customer does not know the difference."

The mainline carriers must come to realize that while many pilots needed work as the airline industry restructured following an economic slowdown that was exacerbated by the Sept. 11, 2001, attacks, "now the regional industry has to compete in the marketplace for those same pilots," Moak said.

Not only are most mainline carriers hiring, but also "foreign airlines from Asia are coming to the U.S. and running summits and saying 'come to us, we will move you to Asia and the Middle East,' and pilots are choosing to go abroad rather than work for wages that are below market," he said.

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