The Pilot Shortage - Is it Really True? - Part Two - June 22, 2012

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The Pilot Shortage – Is it Really True? – Part Two – June 22, 2012

“Robert Novell’s Third Dimension Blog”

  

Good Morning, and welcome back to the 3DB. It is Friday again, gateway to the weekend, and I would like to provide a little more information on the history surrounding the “Pilot Shortage” issue. There will be two more weeks of blog posts on this subject, but I will interrupt the flow of information next week and discuss a different topic to offer up a diversion. 

This week I have part of an interview, that you may have seen, or read, already, that I would like to share as well as input from several other sites. I will close with a few current topics for you to consider, and then give you a few links to follow for additional reading when you have time. So, let’s move ahead and talk about where the industry is going and when the “Pilot Shortage” may appear.

Louis Smith, president of fltops.com, sat down with John Steinbeck, Airline Pilot Central co-founder, to discuss airline pilot hiring. Here is some of what was said:

Has a pilot hiring boom finally begun? It is just beginning and will be the longest and largest pilot hiring spree in the history of the industry.

Which sectors will show the most promise for professional pilots? Among the primary career sectors (major airlines, corporate/fractionals, foreign/expats), the majors will return to the preferred positions for many pilots. The last ten years have been the worst I have ever seen, but the next ten years will be the best.

What’s causing this to happen? The four factors that created the depressed job market are now disappearing. The mandatory retirement age to 65, elimination of the third pilot, oil prices at $147 per barrel, and a severely depressed economy will soon be a distant and bad memory.
All the airlines are starting to show record profits even in a weak U.S. economy, and that has never happened. They have shown some remarkable restraint in expanding their schedules, but now they will have to expand since demand is recovering so quickly. With the baggage fees, the passenger airlines are finally getting compensated for turning jet fuels into lift, just like FedEx and UPS have done for years.

Will pay and benefits at the majors return to their pre-9/11 levels? Adjusted for inflation, no. However, I do expect some contracts to show 30% increases in compensation depending on the success of the pilot unions to leverage their strengths.

Can companies really afford to do that? The unions are figuring out that if passengers are willing to pay $25 for a Samsonite, they must be willing to pay a few more dollars for a “Sullenberger” in the front seat.

What about the highly-publicized stories predicting a pilot shortage? I don’t think the U.S. major airlines will have a pilot shortage. Plus, it’s important to define what the term “pilot shortage” means. To me, it’s when companies pay for pilots to get necessary training to become minimally qualified. The major airlines are a long way from that and with a mobile work force and a highly-unionized pilot group, they will offer whatever it takes to attract qualified pilots. It’s a totally different story at the feeder airlines and the foreign carriers. I expect the feeder airlines (regionals) will need to spend money on low-time pilots to reach the minimums, especially with new regulations coming redefining the ATP.  
The foreign airlines will simply ratchet down their minimum qualifications and increase the pay and benefits to increase the applicant pool and they will likely transition from training bonds to training bonuses to attract the talent they need. We see more of them coming to our pilot job fairs and there are continuous discussions with management about what it will take to improve the number of U.S. pilots willing to leave hearth and home and fly out of a foreign country.

How will Age 65 retirements affect hiring in the future? The age rule changed on December 13, 2007 so all the age 60 pilots who made the cut must retire by their 65th birthday. When the mandatory retirement was 60 years of age, the projected retirements looking forward 14 years would actually occur in 10 years due to disability, early retirement, termination and the "grim reaper". I suspect the projected age 65 retirements over the next 15 years will actually occur in 10 years, but we won't know the real numbers until it happens.
Based on current fleet growth projections, senior pilot attrition will comprise nearly 65% of the pilot demand at the major airlines.

For the entire interview please go HERE. And for a profile on Louis Smith and his company please go HERE.

 Now I want to share with you a blog written by a pilot with the regional airlines who has had a good bit of experience with the promises of tomorrow. His presentation is well prepared, thoughtful, and balanced. Here is some of what he has on his blog:

The Up and Coming Pilot Shortage…

     For those of you who are currently professional pilots and are reading this section, I am sure you are rolling your eyes and/or snickering to yourself as you read the topic above.  Every professional pilot is fed this line at some point in their training.  Again, if I had a nickel every time an instructor, a teacher, a flight school salesman, an admissions officer, an aviation publication, etc., repeated this ridiculous theory, I'd be typing this from my yacht in the Caribbean instead of from my basement in Alabama. (*note- not that there's anything wrong with Alabama)

     For those of you considering becoming a professional pilot, let me make something perfectly clear- THERE IS NO PILOT SHORTAGE.  There hasn't been one in the 23 years I've been flying, and there certainly isn't one coming in the foreseeable future (it's April 2011 as I type).  In fact, just the opposite is true.  Over the 23 years I have been involved as an active pilot, in training, and as a professional pilot wage earner, despite the numerous times I've been told that this shortage is, "just around the corner," or, "just a few years away," there has always been a huge SURPLUS of pilots available to work.

     Now let me tell you how I know there currently is, and has been in past decades, not a shortage of pilots, but a huge OVERSUPPLY of pilots.  I know because I understand supply and demand.  Let me explain….

     If you look at the "Professional Pilot Salaries" section of this site, you'll see that wages for pilots throughout the industry, except at the tip of the pyramid, are extremely low.  They're especially low considering the expense (i.e. risk) the typical pilot has to incur in order to become a professional pilot.  If there ever was a pilot shortage, wouldn't salaries be trending up and not down, as they have been in the past decade?  If there ever was a pilot shortage, do you think flight instructors would still be earning poverty wages and regional airline First Officers would qualify for food stamps at $20,000/year, even during good economic times?  What other job do you know of that requires a 4 year degree, tens of thousands of dollars of additional training, and only pays $10,000 to $30,000 per year in the first several years of one's career?  How does "the man" (he-he) get away with paying such a low wage to pilots, especially new pilots?

     Because he can!  Because he knows that if you don't accept that $20,000/year regional airline job, there are 10 other guys behind you that will.  That reeks of an oversupply of pilots in this industry.  Between this poor economy, the thousands of highly qualified pilots on furlough,  the recent change in retirement age from 60 to 65, and the thousands of new pilots the flight training industry continues to pump out each year with no jobs to go to, unfortunately the huge pilot oversupply problem is not going to change soon.  In fact, in my opinion, it is getting worse!

     If you are considering entering the professional pilot career, you need to understand that the laws of supply and demand are not in your (our!) favor at all, and won't be for the next several years- if ever!  If flight training schools all across the country stopped producing professional pilots tomorrow, we'd still have plenty of pilots for years to come.  If someone ever tries to tell you that a big pilot shortage is just around the corner, run away.

    Also understand that if the regional airline industry in the future were to have difficulty hiring entry-level first officers, whether for a few months or a year or longer, that difficulty does not necessarily constitute a "pilot shortage."   What you would be seeing in that case is a lack of willingness of qualified pilots to accept a job that consists of very low wages and a poor quality of life.  It's very possible that in the future, whether tomorrow or next year when the age 65 retirements start at the airlines, that the regionals with the worst reputations in the profession will have difficulty filling classes.  Again, that's not because there is suddenly a shortage of pilots.  It's because there are many qualified pilots, sitting in the military or working a non-aviation job that will not want to give up their current pay, benefits, and quality of life for a regional airline that offers none of those things.  Keep that in mind if there happens to be an upturn in the airline business and regional airlines start complaining that they can't hire enough pilots.  When the regional airlines are forced, kicking and screaming, to raise entry-level first officer wages to a respectable level, and/or when the major airlines have difficulty hiring pilots, then you'll know a pilot shortage is at hand!  Until then, the pilot shortage myth is just that- an 'oft repeated fable.

 

Click HERE to view the blog article in its entirety and see if the viewpoints expressed can aid you in sorting out the details of the “Pilot Shortage.”

In closing I have a few articles that may be of value to you but before we go there let’s talk about foreign Pilot training. The US has long been the destination for many airline cadets from foreign countries. To train here in the US is cheaper and the number of schools that cater to these students is substantial. Consider the following advertisement:

Due to high demand from cost conscious British and European Pilots, many American flight schools have developed Foreign License Training Programs for Foreign Students. One of the most popular foreign licenses offered by American Schools is the European JAA License. Here many European pilots come over to the US to build flight time at a huge discount compared to Europe, and can actually do entire JAA Training and Licenses like the JAA PPL, JAA CPL, JAA IMC & night ratings, and JAA ATPL Exam Prep. With the advantage of many guaranteed good flying days alongside such lower rental costs, it is hard to beat the USA for pilots in training and those needing flight hours and experience! 

Now, consider the following headline from the LA Times. This is an article that appeared in 1993, which is a little dated, but remember that if there is an economic recovery that produces a large demand for pilots then what portion of these will come from the training programs run by foreign airlines?

Foreign Airlines Solve Their Pilot Shortage with Schools in the U.S.: Aviation: JAL trains students in California's wine country, All Nippon in Bakersfield. Air France, Lufthansa, Iberia, Swiss Air, China Air and Gulf Air all send their pilots to America to learn to fly.

 

Now, let’s look at a couple of links that you will find interesting:

A Global Recession?

 

FedEx to slash costs as global outlook dim

Study Attests to Air Transport's Economic Value

Airline shares down on economic worries

China's Party Is About to End    

I hope that you and yours have a good Friday, a good weekend, and you can enjoy the best that life has to offer. Until next week, take care and be safe.

Robert Novell

June 22, 2012

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