Airlines face severe pilot shortage as summer travel season nears

Carolina Larsson was in her thirties and was working at an investment bank in New York City when she heard a co-worker talk about flying lessons. He was soon taking classes at the same flight school and planning a career change.

“I emptied my 401 (k) and maximized my credit cards and borrowed money from friends,” he said of the first steps toward becoming an airplane pilot, which he calculated cost him about $ 100,000 over several years. “I got everything in. I just hoped it would bear fruit.”

Ten years later, Larsson is the first officer of a regional airline on the East Coast, reflecting on his next professional stage, a move made a little more complicated by his recent marriage to another pilot. But there is a good chance that newlyweds will have plenty of career options in the coming months.

This is because the pandemic heated up a shortage of slow-fire pilots to boiling point, leaving American airlines struggling to hire enough pilots to return flight schedules to full capacity. Scarcity is expected to limit capacity growth and be a factor in rising ticket prices.

Not a “temporary issue”

U.S. airlines received billions in government loans in 2020 to pay their salaries, as travel restrictions, set around the world to curb the spread of the new coronavirus, have led to a sharp drop in reserves.

Airlines went into cash conservation mode, especially when they were between the two tranches of government loans. Carriers reduced capacity and implemented contract freezes and cost-cutting measures. Crucially, they also offered their pilots, among their highest paid staff, incentives to retire early.

Airline pilots are due to retire at age 65, a high limit in 2007 from the age of 60, and the industry was ready for the waves of retirement as pilots of the baby boomer generation s ‘they were approaching that threshold.

These waves would have lasted two or three years, Raymond James analyst Savanthi Syth told MarketWatch. With the pandemic, “it all happened at once,” Syth said.

Flying schools were also being affected and fewer pilots were graduating. Many schools had to close their doors on public health orders, offering flight students fewer opportunities to build the flight hours they need to qualify and slow down graduation rates.

After the demand for air travel began to increase, flight school instructors began to leave to become pilots themselves, which led to other training bottlenecks. In addition, a pilot hired today may receive a better offer from another airline tomorrow.

“There’s a lot of movement,” Syth said. “Today, as a pilot, you are at a very pleasant point, you can become a pilot of an inherited carrier faster than ever.”

CAE Inc. Aviation Training Company CAE,
+ 1.37%

+ 1.17%
it predicted that more than 264,000 new pilots would be needed worldwide over the next 10 years, in addition to the approximately 45,000 pilots needed to fly corporate aircraft.

That includes about 219,000 airline pilots, with 65,000 needed in North America alone, a CAE spokesman told MarketWatch.

In an even longer time horizon, Boeing Co. BA,
+ 4.65%
It was estimated last year that demand for newly qualified aviation personnel remains strong, with 612,000 new pilots, 626,000 new maintenance technicians and 886,000 new cabin crew members needed to fly and maintain the global commercial fleet during the next 20 years.

The Pilot Advisory and Recruitment Service has estimated that a major US airline hired a record 5,426 pilots last year, and is expected to hire around 9,540 this year.

In a call after United Airlines Holdings Inc.’s UAL,
+ 6.94%
Second-quarter earnings in April, United CEO Scott Kirby said United was “increasing” to hire about 200 pilots this year, but shortages are a major obstacle to the growth of airlines smaller ones, including regional airlines flying to United. “This is not a temporary issue,” he said.

Flight training is also fragmented. The CAE graduates about 1,500 new pilots a year, but there are dozens of smaller schools that only a handful of pilots graduate each year.

In total, the industry creates between 5,000 and 7,000 pilots a year and has to hire about 13,000 this year with figures similar to slightly higher by 2023.

Once hired, a newly coined cargo or passenger airline pilot will need four to five months of training, usually within the airline of their choice.

Passenger airlines were also surprised by the speed with which demand for air travel returned, starting last spring, Syth said. “It went from zero to 60 very fast,” and airlines have been doing more hiring than you’ve ever seen.

Hiring new pilots has patterns: in general, regional airlines, which want small, short-distance market routes for different airlines, are seen as a step towards becoming a pilot for larger airlines.

After six or nine years in a regional airline, a pilot would move on to a legacy airline. Low-cost airlines changed that equation a bit, hiring regional airlines and offering pilots more home base options. The race is undergoing a generational shift, but it still attracts younger people and still has a lot of prestige.

“People are passionate about it,” Syth said.

‘Crunch’ capacity and fewer flights

The average annual salary of airline pilots, co-pilots and flight engineers was $ 202,180 in May 2021, according to the Department of Labor.

The department expects growth of 13% for the employment of airlines and commercial pilots by 2030, faster than the average growth of 8% for all occupations.

US airlines have to hire between 10,000 and 15,000 pilots a year, and this year they are hiring about 13,000, so they are meeting their needs, but it is becoming increasingly difficult and will be adjusted for a couple of years. years more, Syth said.

Rising fuel prices and a lack of pilots are the main capacity constraints for airlines, and consumers see this as affecting fare prices.

The latest report from the Consumer Price Index showed that airline fares “continued to rise sharply”, almost 19% in April and the largest increase in a month since the start of the data in 1963.

The cancellations, which affected about 6% of U.S. flights in January amid an increase in COVID-19 cases that sidelined airline staff, hovered around 1% in May.

The travel website Hopper recently estimated that air fares around Memorial Day, which start summer travel, are about 30% more expensive than in 2019, with an average domestic air fare of about 394 dollars per round trip.

“The shortage of pilots will manifest itself with reduced service, reduced frequencies,” and airlines wanting larger planes to make up for that, said Geoff Murray, a partner at consulting firm Oliver Wyman.

“Supply in North America will not be able to meet demand,” especially in medium-sized cities, he said. A city that could have had two daily flights to a larger city on a 50-seat plane, for example, could be left with one flight on a 70-seat plane, Murray said.

Airlines need to preserve their most cost-effective time slots, such as flights to popular vacation spots and long-haul transatlantic flights with staggered cabin services. Therefore, “the top of the pyramid,” wide-body flights and destinations, are likely to remain unchanged, Murray said.

As for how long the shortage may take to resolve, Murray estimated “at least five years, if not more, and the clock began in 2022.”

Murray has predicted that the most likely scenario is a global gap of 34,000 pilots by 2025, which could reach 50,000.

“It’s hard to see the way,” said Peter McNally, an analyst at Third Bridge. Airlines are concerned about the three Cs, he said: costs, capacity and consolidation.

“Costs keep rising, capacity is slow to add and consolidation is still a big question mark,” McNally said. Scarcity is a structural problem, and wages are the number 1 cost of airlines, and it has manifested itself “due to the slow increase in capacity we are receiving.”

McNally predicts that United and other big ones “will be fine” for the most part, but we will see reduced hours, perhaps even for older ones, albeit in 2022, which “will limit capacity and harm consumers.”

‘Zero repentance’

For Larsson, learning to fly a plane attracted him to his adventurous side and his fascination with airplanes dating back to his childhood, which was divided between Spain and Sweden.

Living in New York as an adult and working at the Nordic investment bank Carnegie, he felt that most people in the industry worked there to make money. He left investment banking 10 years ago.

“Very few people would say, ‘I love this job,'” Larsson said. “You start enjoying it because it’s your job, but overall I sensed that people weren’t genuinely happy in the financial industry, and that was something I felt when I came to this industry: people were happy.”

“You don’t actually fly in by chance. Most people start flying because they love what they do,” he said.

Larsson was about to become captain of his regional airline before COVID-19 arrived, and I hope he is back on the horizon now. Ideally, she and her partner want to be in the same city.

She has dealt with a number of recalcitrant passengers in recent months, most of whom do not want to follow the mandates of masks, but she acknowledges that flight attendants suffered the brunt of the problems created, with pilots like her relatively isolated.

“I have no regrets, none. It’s fantastic. I’m still living my dream.”

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