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The Pilot Shoratge - Is it Really True? - June 15, 2012

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The Pilot Shoratge – Is it Really True? – June 15, 2012

“Robert Novell’s Third Dimension Blog”

Good Morning,

The sky is fallingThere is a Pilot Shortage. The sky is fallingThere is a Pilot Shortage.

Who is this new "Chicken Little" running around saying the sky is falling, I meant to say pilot shortage, and why is this happening? The issue is not as complicated as it sounds. First of all please consider that this event occurs every five years or so and is a byproduct of the airline business being cyclical and this pattern, or boom/bust cycle, occurs about every ten years. Immediately after the economy turns down people begin to forecast a turn around and shortly after things begin to move up people start crying pilot shortage; however, the most ridiculous part of this is at a point just before the business cycle peaks all of the new players in the business, who are making money on people looking to be airline pilots, will begin to cry Pilot Shortage again as they begin to get desperate when they see their revenue in jeopardy because of the looming down turn.

Why is this? You guessed it — it is all about the money.

In the coming weeks we are going to dive head first in to this issue and get all of the facts on the table and do so in a fair and balanced way. This is week one and we are going to identify some of the players, give you a little food for thought, and then assign a little extra reading should you be up for the challenge. So, who are the players?

1.     The FAA proposes a budget based in forecasted needs.

2.     Aircraft Manufacturers have a stock price to protect and need that interest free money that investors provide.

3.     Flight Schools need numbers and marketing/forecasting a greater need provides the needed number of warm bodies through the front door.

4.     Regional Airlines and their Academies need cheap labor and their flight academies, and other training academies, flood the market.

5.     Web based employment services provide services for the aspiring airline pilots who are deperate to be noticed by the airlines.

There are of course other players but these are the principles we will talk about; however, for this week I am going to put a lot of facts on the table, give you a reference for each, and talk about the current state of affairs in aviation, as I see it, today.

OK, lets talk about airlines and aviation. Not good, not getting better, and the election in November may provide the turning point. Domestic capacity is being limited by the legacy carriers as they have shifted their focus to the international arena. Good for the regional airlines who are running their airplanes point-to-point out of the major hubs but not good for the pilots of the regional airlines who are not seeing any pay raises. A number of the regionals are recovering from bankruptcy and/or reorginization with Pinnacle Airlines having just filed. It is my hope that the regionals will stabilize by year’s end but the real problem in the  industry is the American Airlines restructuring. Not sure how this will play out but let’s look at all of the Legacy Carriers.

Currently there are six legacy carriers remaining, if you don’t include Southwest, and those carriers currently have around 3300 pilots on furlough. The best source for information on these carriers can be found HERE and if you click on each carrier their statistical data will be summarized for you. Now, if you look on the right side of the page that pops up you will also find the data for the regional airlines which have about 300 pilots on furlough, the LCCs which have less than 100 pilots on furlough, the cargo carriers which have less than 100 pilots on furlough, the fractionals which have about 800 pilots on furlough, and with all of the rest there are less than 500 pilots.  Bookmark this site and stay abreast of the recalls and who is starting to hire. This type of trend information is important to us all.

Now let’s look at what Boeing is saying. Airbus has a similar outlook, which I will share next week, but for now I want to focus on Boeing and the North America numbers. Boeing is saying that there will be a need for 82,800 pilots over the next twenty years or so. Roughly 4100 pilots a year; however, remember that this also includes Canada. Take a look at the chart, and the text, which I copied from HERE.

Pilot Outlook

The signs of a global pilot shortage are mounting as airlines expand their fleets and flight schedules to meet surging demand in emerging markets. Asian airlines in particular are experiencing delays and operational interruptions due to pilot scheduling constraints. The forecast doubling of the worldwide commercial fleet emphasizes the increasing need for well-trained aviation personnel.The largest projected growth in pilot demand continues to come from the Asia Pacific region, with a requirement for 183,200 pilots over the next 20 years. China's expected requirement for 72,700 pilots is the region's largest. Europe will need 92,500 pilots, North America 82,800, Latin America 41,200, the Middle East 36,600, Africa 14,300, and the CIS 9,900.

There are a lot of variables involved in this forecast that you should be aware of: 

1.     The ten year boom/bust cycle in the airline business.
2.     The volatility of oil prices.
3.     The volatility in the Middle East.
4.     The current state of affairs in the EU and the US reference bad debt and currency devaluation.
5.     World economics as all emerging economies try to compete with China.

Next week we are going to look at a few more issues from current events, a few more reading assignments, and a few more charts to digest; however, for now I want you to follow the links below and dissect the information they are providing. 

Journal of Aviation Management and Education

 Flight Training Capacity in the Context of Recent Legislation

 Pilot Shortage Means Big Business for Flight Academies

 Pilot Shortage May Develop as Job Loses Luster 
Buffett Courtship Gives Bombardier Stock Boost  

My best to you and yours and I hope that I will see you back here next Friday. Fly safe.

Robert Novell 

June 15, 2012


P.S. A very serious subject this week so click HERE for a quick diversion.