In 2014, Wyoming commercial airports served a record 1.1 million passengers. However, that success has not been shared by all of Wyoming's commercial airports. Regulatory environments, dwindling pilot supply, operational challenges, aging aircraft and volatile fuels costs have put small communities across the U.S. at significant risk of losing air service.
- Sheridan County Airport lost all commercial service as of April 1st, 2015
- Cheyenne, Riverton and Sheridan all fell below the 10,000 enplanement threshold for 2014, a requirement to qualify for $1 million in Federal Airport Improvement Funding (AIP)
- Projected airline capacity for 2015 from the state of Wyoming is expected to be at a 10 year low
- Industry changes continue to make it difficult to retain, attract and enhance air service
- About half of all Wyoming resident who fly, opt for out of state airports
Below: Airline capacity continues to drop in Wyoming, *2015 is forecasted
The state of Wyoming is not alone in dwindling capacity numbers; communities nationwide served by smaller aircraft are declining as a result of capacity cuts.
Below: Smaller aircraft capacity is on the decline throughout the US. *2015 is forecasted
Wyoming has also had some very notable improvements, including:
- Casper - Natrona County International (CPR), Cody - Yellowstone Regional (COD), Laramie - Laramie Regional (LAR), and Jackson Hole (JAC) each reached record traffic numbers for 2014.
- Jet service was introduced in Gillette, Laramie, and Rock Springs resulting in better reliability and increasing ridership.
Risks to the Future of Wyoming Air Service
Higher ticket prices, fewer flights, poor on-time performance and high cancelation rates may be a few things you've noticed about the airlines recently. Airlines, particularly regional airlines, are being met with a number of significant challenges that are adversely effecting our small communities. New federal regulations have created a shortage of regional pilots, forcing regional airlines to shift their strategies, reduce flights, park aircraft, and rethink the markets they serve.
Federal Regulatory Changes and the Pilot Shortage:
- In August of 2013, new FAA rules went into effect contributing to pilot shortages. These regulations require first officers, also known as co-pilots, to hold an Airline Transport Pilot (ATP) Certificate and must first acquire 1,500 flight hours before obtaining the necessary certification. Previously co-pilots were simply required to hold commercial pilot certificate and 250 flight hours.
- In January of 2014, more restrictive Federal Air Regulations (FARs) pertaining to crew scheduling went into effect, requiring airlines to staff approximately 20 percent more pilots for operating an unchanged schedule (FAR 117).
These rules and regulatory changes had a number of unintentional consequences, particularly relating to regional air carriers serving communities like those in Wyoming.
- With needing to hire roughly 20 percent more pilots, larger legacy airlines such as Delta and United, began to hire more experienced pilots from regional air carriers in order to maintain their schedules.
- Regional carriers are then having to double their efforts in acquiring new pilots to satisfy the approximate 20% lost in through attrition to the larger airlines and an additional 20 percent in order to meet their incumbent needs from the crew scheduling changes.
This ripple effect has left a huge void in the crew resources necessary for regional carriers operations. As a result these airlines have been forced to retire more aircraft, reduce flying frequencies and in some cases to entirely drop service at some smaller communities. In the past, regional airlines were able to draw from a sufficient pool of new pilots but with the addition of the ATP requirement, regional air carriers have now found themselves without a sufficient pipeline of new pilots as student pilot enrollment is on the decline.
Student Pilots On the Decline:
New licensing and hourly requirements has also lead to a decline in student pilot enrollments
- Education and required flight time to become an airline co-pilot can now exceed $200,000 - roughly the same cost to attend a four year public medical school.
- 15 years ago 75-80 percent of student pilots wanted to be a professional pilot, now it's down to 55 percent.
- Fewer military pilots are joining airlines as the military has been actively retaining pilots rather than replace them.
- More domestic pilots are opting to fly overseas where experience requirements are lower, and the pay-grades are often higher.
High costs are discouraging new students from pursuing a career as a commercial airline pilot. More student pilots are opting to become corporate pilots which requires less hours, go overseas where hour requirements are also less and pay generally better, or pursue other careers. Without new pilot replenishments, regional airlines are left with increasing vacancies.
Retirements From Larger Airlines are Set to Soar:
Additionally, between now and 2022, 18,000 mainline pilots are slated for retirement. To put that in perspective:
- Presently, the regional airline industry employs 18,000 pilots. Mainline retirements would require the entire pool of regional pilots for replacements. Additional hirings by regional carriers will not offset retirements.
- Assuming nothing changes, by 2022 the regional airline industry will be 20 percent of what it was in 2014 and 150-200 small communities are at risk of losing air service all together.
Industry Operational Challenges:
Aircraft with 50 seats or fewer, like those serving the majority of Wyoming's communities, have become increasingly uneconomical to operate as costs for maintaining and crewing these aircraft continue to rise. Further pressured by the above regulatory changes, these aircraft are being removed from service rapidly.
- 40 percent of aircraft with 50 or fewer seats, such as those that serve 9 out of 10 Wyoming's communities, have already been retired or are being retired at an accelerating rate
- 50 seat regional jets are no longer being manufactured
- By 2020 most remaining small jets are likely to be retired
- Communities able to retain air service will likely face reduced frequencies to support the use of larger aircraft and those unable to support the new capacity will likely lose all service.
Above: Wyoming has a high dependence on regional jets
Industry Strategic Adjustments and Changes:
Mergers, acquisitions, and an economic downturn have all led to a new method practiced by airlines called capacity discipline; a strategy in which airlines have been decreasing the number of flights and seats available in order to reduce costs and "right size" the market. Analysts believe that capacity growth should only occur at the same rate as the Gross Domestic Product (GDP) for 2014 that would have been 2.4 percent.
Delta Airlines' president, Ed Bastian in June, 2015: Delta is “continuing with the discipline that the marketplace is expecting.”
Above: Airline capacity growth has been limited, 2015 forecasted
Over the last 10 years, U.S. domestic capacity has dropped by 14percent. This reduction means there are fewer flights available, airfares have increased, planes are more crowded and competition for air service amongst airports has intensified. Smaller markets like Wyoming are at an increased risk as they often operate at a smaller profit margin. Air fares are also likely to remain somewhat unchanged as a result of this practice.
American Airlines' chief, Doug Parker, on the airlines learning their lessons from past price wars: “I think everybody in the industry understands that.”
With cautionary capacity growth, airlines have also been exhibiting risk aversion, meaning they have been reluctant to start new routes without significant revenue guarantees offered by the communities or businesses; which still may insufficient. Since providing new air service to smaller communities is typically regarded as a high risk venture, revenue guarantees can be a significant financial risk or burden to the communities.
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