Airlines are facing a serious pilot shortage as the summer travel season approaches

Carolina Larsson was in her 30s and working at an investment bank in New York City when she overheard a colleague talk about flight instruction. Soon she was taking lessons at the same flight school and planning a career change.

“I’ve emptied my 401(k) and used up my credit cards and borrowed money from friends,” she said of becoming a pilot, which she estimates has cost her about $100,000 over several years. “I went all in. I just hoped it would pay off.”

Ten years later, Larsson is First Officer with an East Coast regional airline and contemplating her next career move, a move made somewhat complicated by her recent marriage to another pilot. But there is a big chance that the newlyweds will have many career opportunities in the coming months.

That’s because the pandemic has brought a simmering pilot shortage to the boil, and US airlines are scrambling to hire enough pilots to bring schedules back to full capacity. The shortage is expected to limit capacity growth and be a factor in higher ticket prices.

No “temporary problem”

US airlines received billions of dollars in government loans to pay their salaries in 2020 as travel restrictions imposed around the world to stem the spread of the novel coronavirus caused a sharp drop in bookings.

Airlines went into austerity mode, especially when they were between the two tranches of government bonds. The airlines reduced capacity and implemented hiring freezes and cost-cutting measures. Crucially, they also offered incentives to their pilots, including their highest-paid employees, to take early retirement.

Airline pilots are required to retire by age 65, a limit that was raised from age 60 in 2007, and the industry braced itself for waves of retirements as baby boomer pilots approached that threshold.

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

Flight schools were also hit and graduating fewer pilots. Many schools were forced to close their doors by public health order, leaving student pilots with fewer opportunities to accumulate the flying hours they need to qualify and slowing graduation rates.

After the demand for air travel began to increase, flight school instructors began leaving to become pilots themselves, leading to further training shortages. In addition, a pilot hired today may get a better deal from another airline tomorrow.

“There’s just a lot of movement,” Syth said. “Today you are in a very good place as a pilot, you can become a pilot of an old airline faster than ever before.”

Aviation Training Company CAE Inc. CAE,

predict that more than 264,000 new pilots will be needed worldwide over the next 10 years, in addition to the roughly 45,000 pilots needed to fly business jets.

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

Looking at an even longer time horizon, Boeing Co. BA,
estimated last year the demand for newly qualified aviation personnel remains highwith 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 over the next 20 years.

Pilot recruitment and consulting service has estimated that major US airlines hired a record 5,426 pilots last year and are expected to hire about 9,540 this year.

In a call following the UAL from United Airlines Holdings Inc.
Following second-quarter results in April, United chief executive Scott Kirby said United will hire about 200 pilots this year, but the shortage is a major impediment to growth for smaller airlines, including the regional carriers that fly for United. “This is not a temporary problem,” he said.

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

Overall, the industry makes an estimated 5,000 to 7,000 pilots a year and needs to hire about 13,000 this year, with similar to slightly higher numbers for 2023.

Once hired, a newly hired passenger or cargo pilot typically requires four to five months of training with their chosen airline.

Passenger airlines were also surprised at how quickly demand for air travel returned, starting in the spring of last year, Syth said. “It went from zero to 60 very quickly,” and airlines have made the most adjustments she’s ever seen.

There are patterns in hiring new pilots: typically, regional airlines flying short-haul routes for various small-market airlines are seen as a stepping stone to becoming a pilot for larger airlines.

After six to nine years with a regional airline, a pilot then switched to an old airline. Ultra-low-cost airlines changed that equation a bit, hiring with regional carriers and giving pilots a wider choice of home bases. The career is going through a generational change, but it still attracts younger people and still has a lot of prestige.

“People are passionate about it,” Syth said.

Capacity “creaks” and fewer flights

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

The department projects 13% growth in airline and transport pilot employment through 2030, faster than the 8% average growth for all occupations.

U.S. airlines need to hire about 10,000 to 15,000 pilots a year, and they’re hiring about 13,000 this year, so they’re meeting their needs, but it’s getting harder and tight for a few more years, Syth said.

Rising fuel prices and pilot shortages are the biggest capacity constraints for airlines, and consumers are seeing this impact on air fares.

The latest CPI report showed air fares “continued to rise sharply”. almost 19% in April and the largest one-month increase since the data began in 1963.

Cancellations, which affected about 6% of US flights in January amid a surge in Omicron-COVID cases that have airline staff shunning, are down about 1% in May.

Travel site Hopper recently estimated that around Memorial Day, which kickstarts summer travel, airfares are about 30% more expensive than 2019, with the average domestic airfare hovering around $394 round trip.

“The pilot shortage will manifest itself in reduced service and reduced frequencies,” and airlines flying larger planes to compensate, said Geoff Murray, partner at consultancy Oliver Wyman.

“North American supply will not be able to meet demand,” he said, particularly in mid-sized cities. A city that may have had two daily flights to a major city on a 50-seat plane may be left with one flight on a 70-seat plane, Murray said.

Airlines must maintain their more profitable slots, such as flights to popular holiday destinations and wide-body transatlantic flights with staggered cabin services. “So the top of the pyramid,” widebody flights and destinations, should remain unchanged, Murray said.

Murray estimated how long it might take for the scarcity to clear, “at least five years if not more, and the clock started in 2022.”

Murray has predicted the more likely scenario is a global gap of 34,000 pilots by 2025, which could turn out to be as high as 50,000.

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

“Costs are still rising, capacity is being added slowly, and consolidation is still a big question mark,” said McNally. The shortage is a structural problem, and wages are airlines’ number one cost, and it’s manifested itself “in the slow capacity creaks we’re getting.”

McNally predicts United and other majors “will be fine” for the most part, but we will see reduced schedules, maybe even for the majors though 2022, which will “limit capacity and hurt consumers”.

“Zero Regrets”

For Larsson, learning to fly an airplane appealed to her adventurous side and a fascination with airplanes that dates back to her childhood spent between Spain and Sweden.

She lived in New York as an adult and worked at Nordic investment bank Carnegie. She felt that most people in the industry wanted to make money. She left investment banking 10 years ago.

“Very few people would say, ‘I love this job,'” Larsson said. “You start to enjoy it because it’s your job, but in general I’ve felt that people in finance aren’t really happy, and that was something I felt when I came into this industry: people were happy.”

“You don’t really get into flying by accident. Most people get into flying because they love what they do,” she said.

Larsson was due to become a captain on her regional airline before COVID hit, and hopes that’s on the cards again now. Ideally, she and her partner would like to live in the same city.

She has dealt with some reluctant passengers in recent months, most of whom did not want to comply with mask regulations, but concedes that flight attendants bore the brunt of the problems created as pilots like her were relatively isolated.

“I have no regrets, nothing. It is wonderful. I’m still living my dream.” Airlines are facing a serious pilot shortage as the summer travel season approaches

Brian Lowry

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