Airline Pilots: Coming Up Short

The most dramatic change came in 1978 when the Airline Deregulation Act became federal law, removing government-subsidized airfares and allowing free-market competition to drive airline fare prices. The result was lower fares and more people using the airline system. Unions lost some of their bargaining power as smaller profits drove the major airlines to drop point-to-point routes in favor of hub-based routing. Regional airlines started to boom, but they hired less-experienced pilots at salaries below those of the major carriers. Fast-forward to today, and a shiny, new regional first officer starts with a paycheck of around $25,000/year. But a new era for pilots appears to be on the horizon.

Numbers are starting to emerge---especially from foreign airlines---indicating that the much-hyped pilot shortage may be a reality. Regular readers of this magazine know that we've been talking about a pilot shortage for the past three years, with some folks harrumphing and shaking their heads that it could never happen. Fasten your seatbelts, because the run-up has already begun.

This July, Roger Cohen, president of the Regional Airline Association, spoke at a luncheon in Wichita, Kan. He was addressing the very subject of a pilot shortage. Because of the way the airline hiring system works, regional airlines are a sort of "farm team" for the major carriers.

Regionals use smaller aircraft and fly short hops, and thus employ pilots with the least qualifications. It's standard practice for a newly minted pilot with advanced ratings to start as a first officer at a regional. Because of that, it's at the regional airlines where a shortage will first be felt. There was obvious concern in Cohen's voice.

"The supply of pilots is going to be a major, major issue for us," Cohen said. "The pilot shortage is coming, and it's going to have a real-world impact."

He went on to describe all the reasons why a shortage is looming, and how regional airlines are worried about everything from declining student-pilot numbers to the new 1,500-hour requirement for first officers. Cohen even urged people to contact their representatives in Congress to ask the Federal Aviation Administration to change the 1,500-hour requirement. He suggested that aviation should become a national priority, and that government funds should be used to facilitate flight training. "An investment must also be made in the human capital," Cohen said.

The Boeing Effect
Cohen's keynote address came on the heels of Boeing's release of their yearly "Current Market Outlook 2012-2031." The Boeing report is one of the most respected---and accurate---airline market forecasts in the world. In the almost 50 years that Boeing has been compiling and publishing this forecast, its uncanny accuracy in predicting air-traffic volumes and demand have made it an indispensable tool for industry watchers.

"As global economies expand and airlines take delivery of tens of thousands of new commercial jetliners over the next 20 years, the demand for personnel to fly and maintain those airplanes will be unprecedented," reads Boeing's report. In tangible terms, the report forecasts the need for 460,000 new airline pilots by 2031; that's 23,000 per year for the next 20 years. The demand for maintenance technicians will be even higher at 601,000.

For pilots, the biggest growth area is---no surprise here---the Asia Pacific region, swallowing up a big chunk of 185,600 pilots. Europe will be second, requiring more than 100,000 pilots by 2031, and in North America, the demand will be for 69,000 new pilots in the next 20 years.

The industry is worried about those numbers for several reasons. One problem is student-pilot starts. The year 2010 had the lowest number of student-pilot certificates issued on record at 54,064---down from 65,421 10 yearsprior. Historically, about 20% of the total pilot population holds an airline transport pilot (ATP) certificate, so a decrease in student starts means a decrease in total pilots, and thus a decrease of ATP holders (read, airline pilots). This year, the FAA issued just over 8,500 commercial pilot certificates. The gap between the 23,000 pilots per year needed and the number coming through the system is what's causing such alarm.

Foreign Opportunity
A shortage is already in full swing in certain sectors. According to the Boeing report, "A pilot shortage has already arisen in many regions of the world. Asia in particular is experiencing delays and operational interruptions due to pilot scheduling constraints." There are reports coming out of China of airliners being parked for extended periods because there are no pilots to fly them. The problem is getting worse. The Civil Aviation Administration of China just issued a report projecting a need for more than 15,000 new pilots just by 2015.

Airlines based in Asia and in the Middle East have been aggressively recruiting American pilots through job fairs in the U.S., and with lucrative "signing bonuses" that offer a monetary reward for pilots willing to live overseas and fly for a foreign carrier. A first officer for an overseas carrier could get promoted to captain in half the time it takes in the U.S., and they can do it at twice the pay. Many foreign airlines are offering attractive housing packages to boot.

Kit Darby, an airline hiring consultant in Peachtree, Ga., said an American pilot willing to fly for a foreign carrier in the Middle East, China or India can earn well over $100,000 a year plus housing and other perks. WASINC International, a foreign airline recruiting company, is currently offering $198,000 a year plus bonuses, plus a $4,000/month housing allowance for new Airbus pilots in Europe and China. According to Darby and other industry officials, thousands of furloughed U.S. pilots are now flying for foreign airlines. The attraction is obvious as opportunities abound.

Whether a pilot shortage will affect domestic major airlines in a serious way remains to be seen, but regionals and foreign carriers have a lot to worry about. The economy is surging in the Asia Pacific region where the airliner fleet will grow 11% a year through 2015. That, in turn, will stimulate travel in the United States as international companies do business globally. Also, air cargo continues to grow both domestically and internationally, and is expected to grow an average of 5.2% over the next 20 years.

Domestically, Americans still use air travel as their main form of transportation, with regional airlines transporting millions of passengers to major hubs. The number of passengers regional airlines carry has grown from 82.5 million in 2000 to 161.4 million last year. As of this writing, three more airlines in the U.S. (JetBlue, Spirit and US Airways) have reported record, or near record, profits for the second quarter of this year. That growth is expected to continue even in light of oil prices and increasing customer complaints.

Falling Short
A pilot shortage is being fueled by several factors. The most pressing is the extension of the pilot-retirement age. In December 2007, the FAA raised the mandatory retirement age for pilots from 60 to 65. Pilots who were age 60 when that mandate was passed will reach retirement age in December---just weeks away. Industry estimates are that some 2,000 pilots will reach mandatory retirement this year alone, starting a wave that will continue to decrease the airline-pilot population each year. The Aircraft Owners and Pilots Association (AOPA) estimates that 20% of current ATP and commercial certificates are held by pilots 60 and older.

Naysayers point to the 70,000 current pilots---many on furlough---who they say will fill many of these slots. But if you factor in mandatory retirements, pilots who have left the industry altogether, deaths and those who have lost their medicals, that number falls dismally short. Les Westbrooks, an Embry-Riddle Aeronautical University Professor and former airline pilot, said that the demand for new pilots will be immune to the business and hiring cycles that normally follow the economy because of forced retirements alone. "There is an absolute demand," noted Westbrooks.

Meanwhile, in response to the 2009 Colgan Air crash in Buffalo, N.Y., Congress passed Public Law 111-216a, mandating that the FAA revise flight-crew training requirements. In response, the FAA enacted a new rule that takes effect in August 2013. The rule raises the experience level required to be an airline first officer from the current 250 hours of flying time to 1,500 hours, the same level as currently required of captains. The AOPA figures this could cost a flight student an additional $90,000 to meet.

The supply of military-trained pilots that have fed airlines in the past has all but dried up as more military pilots choose to remain in the military, and the number of pilot slots in each service is a fraction of what it was. Unmanned Aerial Vehicles (UAV) are making a big dent, as is the changing role of military aircraft in general.

At the same time, the pilot population is shrinking. Just 4,677 ATP certificates were issued in 2011, compared to nearly 8,500 in 1990. Private pilot certificates have also declined, from about 40,000 new certificates granted in 1990 to just 16,802 in 2011.

The Turnaround
With all the negativity in the industry, why would a career as an airline pilot make sense? The fact is that it remains an excellent choice if you look beyond regional-first-officer starting salaries. Even moderate experience boosts pay into a more desirable range.

For example, new pilots for the majors are earning at least double the $25,000 that new regional pilots start at, with rapid increases based on seniority. For example, industry salary sources show a 10-year Southwest Airlines captain earns more than $200,000, with three-week vacations and 15-17 days off a month. A highly experienced FedEx captain can earn $250,000 or more.

Supply and demand can't help but drive regional-pilot salaries, benefits and bonuses upward. As regionals feel the squeeze and safety concerns drive them to hire pilots with more experience, regional-first-officer salaries will climb.

After all, regional airlines are where the majors get their pilots. As regional airlines lose their senior pilots to the majors, they'll be forced to upgrade their first officers to captain.

A shortage of first officers will ensue, and regional airlines will look to hire civilian pilots who meet their minimum requirements. Unlike the hiring boom of 2005-2006, this shortage will be much deeper, as retirement and all the other factors fail to replenish the pilot pool. It's here where preparation will meet opportunity.

Will airline-pilot salaries and perks ever match their "Golden Aviation Era" heights? Nobody knows for sure, but what's obvious is that there will be enormous opportunity with both regional and foreign carriers. It's true that this shortage is just revving up, but when it's in full swing, those with the right training will have the world open to them.

And if flying is in your blood, there will be jobs available. As Cohen smilingly said during his luncheon speech in Wichita, "They're paying you to fly an airplane, and that's
pretty cool."