I'VE GOT A BAD FEELING ABOUT THIS...

With the CARES Act monies and its requirements largely behind us, it is time where the direction of small community air service will start to come into better focus.

The title is close to what Ben Crenshaw said to the press on Saturday night with the 1999 U.S. Ryder Cup trailing the Europeans 10 - 6 heading into the singles matches. The Europeans only needed 4 points to hold on to the cup. The U.S. team needed to win 8 1/2 points of the 12 on Sunday to win back the Cup. Against improbable odds, Crenshaw said to the press that he had a "good feeling" about Sunday. The U.S. did win at The Country Club in Brookline, MA.

The two biggest cost centers for an airline are labor and fuel. One somewhat controllable, the other not. As I write, the cost of a barrel of oil traded as high as $81.50 - a 7-year high. Pilots at regional carrier PSA were recently offered up to $187,500 in bonuses - $150,000 designed as a retention bonus. This industry is a pattern bargainer despite the economics.

Each of the cost centers are increasing on a steep trajectory because of a SUPPLY SHORTAGE. Yep, that supply and demand thing.

Trust me when I say this equation does not work for all smaller communities that have been on the commercial aviation route map for decades - some with strong financial results, some not. The small jet that serves many of these communities was a money-maker for nearly all at 2015 pilot wages and $50/bbl oil.

2021 Pilot Wages + $80/bbl oil = less small community air service.

The confluence of events this time feels totally different than at other times in the past. For the most part, a shortage of pilots occurred just prior to an economic downturn that dampened the demand for airmen and women. NOT THIS TIME. High oil prices could be passed off to the consumer thus alleviating much of the income statement damage. NOT THIS TIME.

Wherever you look, the supply chain has cracks, if not broken and in need of major repair. Costs are going up at a time when the industry has virtually no pricing power. It is about winning back customers and the price of a ticket is still king.

It's just hard to amortize these costs over 50 seats in what is likely a weak revenue environment. As I have written many times before - it will be hard for the industry to be everything to everyone unless a new technology suddenly emerges. NOT YET. I hate to see any small community lose air service - but it is also time to be thinking about contingency plans for many.

As the world economy begins to recover from the Pandemic, the demand for oil will not be going down and higher prices can be expected. As for pilots, the industry never re-filled the pipeline as the shortage reared its head in 2014. But the military will bail out the commercial airline industry. NOT THIS TIME.