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The true cost of doing business in the regional sector

Today, USA Today published an article eluding to the coming economic pinch that will hit the regional airline sector in the coming years.

The article is accurate and on point, and states the problem simply; there aren’t enough pilots willing to operate regional airliners for the wages being offered today. That is to say, highly trained and experienced pilots are unwilling to offer their services for, at the highest paying regional airlines, around $25,000 per year.

While I could take the time to detail the moral and economic absurdity of these pay rates, I will instead present an argument that I’ve made in the past as it relates to the actual cost that each passenger is paying for their first officer at a regional airline.

Let’s assume that a group of 50 passengers wish to engage my services in the operation of an EMB-145 aircraft, for which I am type rated, with a one hour flight. If I were to hold myself out at the first year rate of an ExpressJet pilot, which is $23 per hour, each passenger would end up paying me 46 cents. Obviously, if this were a two hour flight, each passenger would realize a net cost for my services of 92 cents.

Quite the deal to fly 800 miles.

But we know labor costs aren’t the only fee when operating an aircraft, so to put this in perspective, let’s figure out the fuel costs for this flight.

Let’s assume the EMB-145 burns around 3,000 pounds per hour, which is 441 gallons using a conversion ratio of 6.8 pounds per gallon. AirNav tells us that, today, the average price nationwide for JetA is $5.49 per gallon. This means that the total cost for fuel for this one hour flight would be $2421, or $48 per passenger.

Compared to the 46 cents that the first officer costs.

And if I were paid at Delta’s first year pay rate for the 717 instead of ExpressJet’s first year rate for the EMB-145? I would charge each passenger $1.36. Still quite the deal.

Conclusion? Labor costs are never dispositive when determining an increase in fares at an airline.