Analysis: Pilot Shortage 2.0 on Horizon Unless Airlines Act
Posted byKathryn B. Creedy April 21, 2021 Posted inAirlines, Aviation, Aviation Education, Business Aviation, Cargo, members-only, Pilots, Training, Uncategorized, Women in AviationTags:members-only
More than half of retirement eligible pilots are gone
Study warns airlines to start training now to avert new pilot shortage.
More than half of pilots nearing retirement took early outs.
30,000 expected to abandon airline pilot career.
Booming flight schools provide important pipeline.
Career projection unlike anything we've seen.
Training funding still biggest barrier
For years, airlines, business aviation and even the military struggled with workforce shortages. Covid-19 led to furloughs and, of course, the accelerated retirement of thousands of airline pilots, technicians and manufacturing personnel. While providing a brief respite, retirements only mean a more acute pilot shortage that could start as early as this year. For the first time we have an estimate of how many pilots took early retirement.
Credit: Mike Phillips, WDEL
So it is not surprising to see airlines rejuvenating their pipelines such as United's recent announcement it would hire 5,000 pilots by 2030, at least half of which would be women and people of color. It expects to enroll 100 students this year.
American, announced it would fly 90% of its 2019 schedule this summer, recall its pilot corp and resume hiring with a goal of 300 this year. It expects to double that next hear while Allied Pilots Association worries the carrier will be short of pilots as it takes time to return to the flight deck, according to Simple Flying. Spirit and JetBlue also said they will resume hiring this year.
A recently released study by Oliver Wyman notes the experience after 9/11 and the Great Recession when new pilot certifications fell 30% to 40% in the five years after the crises. Compounding this will be the departure of what the study estimates as 25,000 to 35,000 current and future pilots abandoning the cyclicality of the aviation industry in favor of more stable careers over the next decade.
But this time, at least for pilots, there is hope for operators in search of new hires. In addition to airline programs, the flight training business is booming which means at last, the pipeline is increasing not just for duffers but for those seeking careers. The question is whether the industry can build capacity fast enough to feed the 34,000 global pilot gap expected by 2025, according to the Oliver Wyman study.
"For individuals considering being a pilot, they are looking at a career projection unlike anything we've seen in decades," said Oliver Wyman Partner Geoff Murray, who was involved in the study.
The reason a booming flight training business is good news is the study is a clarion call for the industry to get ready for pilot shortage 2.0. It is no secret Covid-induced early retirements prompting worries when the pilot shortage returns it will be worse. But we haven't really had any hard numbers of how many of the 12,000+ pilots that were reaching retirement between 2020 and 2024 would actually take the early outs offered by the airlines. It looks to be more than half.
"It was a perfect storm that Covid served as catalyst largely for early retirements," Murray told CNBC. "For most airlines, the easiest way to reduce pilots they did not need was through early retirements."
Experts estimate there are about 88,400 airline pilots in North America, a subset of ATP certificate holders. About 7,300 took early retirement and it is expected another 1,800 will reach 65 or be medically retired across 2020/21. Another 300 will leave the commercial flight deck for other opportunities making a total of 9,400 pilots exiting the industry. That is about 12% of the workforce but Oliver Wyman believes at some airlines in the US, retirements were as high as 20%. "They could come back but it is unlikely," he explained. "Pilots are based on seniority and they would have to come back at the bottom of the seniority list. They may turn to carriers expecting more rapid growth, but our studies show once they exit, they do not come back."
Kit Darby, a consultant on pilot careers, offered a chart to show what happened between August 2020 and 2021.
Source: Kit Darby Consulting
"The chart shows how many pilots were going to retire each year at one airline on the top line," he told FA/AW News. "The lower line shows how may will retire after the early retirements at that airline. Other airlines with early retirement programs would be similar. Retirements are still strong, but the early retirement took off the peak of the curve."
He estimates early retirements taken in response to Covid condensed two the three years of normal retirement activity into a single year.
Regionals Take the Brunt Again
Of course, it is worse for regional airlines, many of which suspended hiring in 2020.
"For regional airlines, the shortage is already here," Murray told Future Aviation/Aerospace News (FA/AW News) in late March. "Much of the flying that was [recently announced] is entirely with regional aircraft, specifically 50-seat CRJs and ERJs. The regionals will significantly feel the pain by the third quarter of this year."
Oliver Wyman is not alone in its workforce expectations. Tellingly, 62% of flight operations leaders listed a shortage of qualified pilots as a key risk when surveyed in 2019, according to the study.
For those arguing there was never a pilot shortage but rather a pay shortage, that doesn't stand the test of time since pilot pay rose and, in some cases, the all-in, new-hire investment at regionals is $100,000 or more.
"Based on a modest recovery scenario, we believe a global pilot shortage will emerge in certain regions no later than 2023 and most probably before," the study said. "However, with a more rapid recovery and greater supply shocks, this could be felt as early as late this year. Regarding magnitude, in our most likely scenarios, there is a global gap of 34,000 pilots by 2025. This could be as high as 50,000 in the most extreme scenarios. Eventually, the impact of furloughs, retirements and defections will create very real challenges for even some of the biggest carriers. One cushion airlines created was keeping 100,000 pilots on payroll but flying reduced schedules or on voluntary company leave. In the US, such programs have been very popular and will provide the airline some flexibility once the industry begins to recover."
The Oliver Wyman report sees the largest shortages in North America, Asia Pacific, and the Middle East while Europe, Africa, and Latin America remain closer to equilibrium.
"In North America, with an aging pilot population and heavy use of early retirements, the shortage reemerges quickly and is projected to reach over 12,000 pilots by 2023 – 13% of total demand," said the report. "However, Asia Pacific, with a faster growth trajectory will surpass this by the end of the decade with a projected shortage of 23,000 pilots by 2029. This can have real implications on the timing and depth of regional shortages as pilots migrate to areas of opportunity, potentially accelerating or deepening shortages in other regions."
While economic shocks are just part of an airline career, happening at least once a decade, it should not be surprising that, with an expected minimum of four downturns during a given career, some would depart for more stable pastures.
Even so, pilots seem optimistic given the Flightglobal study last October indicating 72% of the 2,600 surveyed saw industry recovery to 2019 levels in the next few years and 64% indicated they would still be a pilot despite such economic after the Covid experience. However, those who would recommend the career, dropped to 46%, the lowest percentage in many years.
Training Continued Despite Covid
While Boeing and CAE maintain their global demand forecasts of 763,000 and 264,000 by 2039 and 2029, respectively, there is no question there was an immediate airline training lull as Covid gained its stranglehold on travel. L3Harris noted half of the demand for its flight training service dropped off. And Lufthansa Aviation Training suspended its ab initio training offering its 850 students full refunds. It doesn't expect to reopen until next year.
Source Boeing
But Murray noted while airline cadet programs slowed in the US, they did not stop. "No U.S. airlines actually shut them down," he said. "Some of the European airlines have but we expect this space, in particular, to really gain traction in the next 12 months."
In fact, Murray sees a real boom in a year to 18 months for both flight schools and university aviation programs. Indeed, before the pandemic these entities had already reported a multi-year increases in demand for aviation education and flight training.
The Flight School Association of North America, where US regionals avidly recruit, is already seeing the uptick in activity among its members. Far from mirroring the drop in flight training from previous economic downturns, a boom, started a few years ago, continues and suggests this time may be different.
"Many flight schools are busier than ever," FSANA President Bob Rockmaker told FA/AW News. "Some are in need of more flight training aircraft like Nashville Flight Training (NFT). I feel the flight training community is going to be pushed past its limits within the next six- to-12-months. Securing additional lift is a serious key performance indicator, coupled with the need for more flight instructors. The major 121s reduced their workforce with early retirements. The majors will need to add more first officers and they will come from the regional 121s. The 121 regionals grab their FOs mostly from the CFI community, making a perfect storm. A high demand for training aircraft and flight instructors is on our doorstep. We may be heading toward some very busy times in the aviation and aerospace industry."
Chris Erlanson, CEO of NFT and vice chair of FSANA, agrees. "First, I really think the secret is out and there are a lot of people who have figured out pilots are making a lot of money," he told FA/AW News. "Nashville Flight Training has gone through an amazing rebound. We are 12% up from pre-Covid. Last year we shut down to put in new sanitary protocols. When we opened back up, the flood gates burst with the pent-up demand. I keep buying more airplanes and hiring more instructors because demand continues to be there."
Erlanson saw the biggest upticks coming from government stimulus money in June 2020 and March of this year.
"What we noticed is students thinking $1400 buys more lessons, so they began doubling up on their training," he said. "They figured out that there's a payoff in the industry. They've done their homework and see that after every crisis the airline industry is resilient, that it made it through 9/11, 2008, and the 100% of the time the airline industry came back."
Source: FSANA
In fact, the economic shocks of the last four decades, were key safety valves staving off the pilot shortage until 2013. But the sustained growth of the airline industry since 2009 as well as regulatory changes led directly to the pre-Covid shortage and will be repeated in the very near future if the industry does not act now.
Erlanson noted most of NFT students are pursuing a career change. "They got a college degree majoring in business marketing or biomedical technology but have decided that it would be much more fun to fly for an airline," he said. "This is not a bucket list thing. They are looking for a career. They have done their homework and know that for $50,000 they can jump into an airline and earn as much as $100,000 very quickly. They see this is a good return on any education investment."
Well, getting to an airline may not be as easy as that but with the shortage since 2013, pilot pay has skyrocketed as has the ability to move quickly from training to the right seat, the left seat and then on to a major airline at faster rates than at any time in history.
The question then becomes whether or not we will see regionals poaching CFIs which broke the pipeline and left many aspiring pilots without the ability to complete their training.
Erlanson doesn't think so because there is now a flight instructor surplus with three to five resumes reaching him daily. In addition, in an informal policy at the height of the pilot shortage airlines pledged not to cut the pipeline by hiring all the CFIs. That was coupled with the fact pilots still had to build 1500 hours flight time before they could be hired at a commercial airline and instructing is how many did it.
However, he is already seeing an uptick in hiring calls from regional airlines, cargo carriers, Wheels Up and others seeking pilots. But the increase in flight training demand means he will ultimately have a steady supply of flight instructors to replace those hired away.
"From our standpoint we know we are not the job," he explained. "We are just a chapter in a pilot's life. But we are the job that gets you to the job. The good news is the pipeline has absolutely grown. It feels like it is going back to normal whatever that definition is."
Despite the uptick at universities and flight schools risks remain, not the least of which is the ability of students to sustain their training. It is well known cost remains one of the biggest barriers and, according to the Aircraft Owners and Pilots Association, 80% of trainees drop out citing funding as the reason. For that reason, the University Aviation Association produces an annual Scholarship Catalogue of the thousands of scholarships available.
United's new program with Historically Black Universities and other diverse pipelines, is backed by scholarship commitments from United and JPMorgan Chase. And for those United Aviate Academy students who may need additional financing, United is partnering with Sallie Mae to offer private student loans "to ensure that no highly-qualified, highly-motivated, eligible applicants will be turned away solely because they can't afford to enroll."
While we wait to see whether the flight training boom will be sustained, Oliver Wyman says airlines, in the meantime, might want to rethink crew operation to improve productivity and reducing the number of pilots required and driving down costs.
Airlines, it said, also need to reinforce the pipeline by continuing to invest in training programs and pilot recruiting including addressing funding barriers. They had such infrastructure in place pre-Covid but financial institutions pulled back on industry uncertainty. However, it is likely to be restored.
Airlines will also need to work on retention given the report's estimates that 25,000 will leave the industry because of its instability. One of the key demographics to be addressed is women given the impact of Covid fell hardest on them forcing millions to leave the workforce. With only 7% of women pilots, the industry cannot afford to ignore the changes needed to accommodate better work/life balance wanted by all pilots.
As in the past, an airline's ability to grow entirely depended on its success filling its pilot ranks and the pilot shortage stymied that growth at a critical period for airlines. That makes it important to start now to rebuild the pilot ranks and avoid the next pilot shortage.
https://atomic-temporary-183320841.wpcomstaging.com/2021/03/29/1st-aopa-hs-curriculum-grads-coordination-needed-with-education-programs/
https://atomic-temporary-183320841.wpcomstaging.com/2021/03/08/how-industry-unions-hurt-women-pilot-recruitment/
https://atomic-temporary-183320841.wpcomstaging.com/2021/03/08/how-industry-unions-hurt-women-pilot-recruitment-part-ii/
Building the Workforce Part III