Monday, February 03, 2014

It's Here!

We've commented on the coming pilot shortage before as it has been said to be imminent for perhaps a decade now. Always there has been some event to forestall its arrival, but like the long awaited and feared radioactive flotsam from the Japanese tsunami, it seems to be finally washing up on our shores. An article in today's Wall Street Journal (subscription needed) details United Airline's decision to drastically reduce the size of their Cleveland hub. Make a note that the proposed cuts are to commuter aircraft, the small 50 seat jets flying to regional destinations. Mainline flying with narrow-body Boeings and Airbuses will be unchanged (for now).

A new federal rule that requires new pilots to have 1,500 hours of flight experience, instead of 250 hours, has caused a shortfall in regional pilot ranks. This is causing a creeping pilot shortage among big airlines, which routinely recruit new aviators from regional carriers. 
"Although this is an industry issue, it directly affects us and requires us to reduce our regional-partner flying, as several of our regional partners are beginning to have difficulty flying their schedules due to reduced new-pilot availability," the CEO said in the memo.

So apparently they can't fill their schedule partly due to not being able to find enough pilots to hire with the requisite hours. One must read between the lines because what the CEO really meant to say is that they can't find enough $18,000/yr pilots who are willing to spend perhaps $60k to get the ratings and experience for that $18k starting salary. Perhaps after a while there might be found pilots at higher wages. But that's the rub, isn't it? (By the way, the military is doing a better job of hanging onto their pilots so that source is drying up.)

At the higher wages necessary to attract pilots, the economics of flying commuter aircraft may not work. Buying a ticket on a commuter aircraft is already crazy expensive and is likely to get more so. At some point customers will simply drive. Other likely trends will be to see an acceleration of the grounding of the now uneconomic 50 seaters in favor of larger 90 or 130 seat aircraft. The problem with larger aircraft is some markets just don't have the demand to fill a 130 seat aircraft nor the pricing power to support a 50 seat aircraft. These destinations, save for the government's Essential Air Service subsidy program will lose commercial air service.

We've mentioned before that the cause of all this mischief was the rule change resulting from laws passed in the wake of the Colgan crash of several years ago. Even though both pilots in that accident had well above the newly established minimums, Congress had to show that they were doing something to fix an air transportation system that is already the safest in the world. Forcing people into their cars where they are orders of magnitude more likely to be killed or injured in auto wrecks seems just like the perfect fix. Economics is (apparently) hard.


  1. As a telecommuter, who rarely if ever leaves his comfy home office to work, attend meetings, etc....I am personally pessimistic about the financial viability of these short-haul routes for business; and with these routes drying up, so will go the opportunities afforded entry-level pilots. Sure, there will always be a niche business that requires the physical presence of consultant and a client, but sadly, the era of low-cost air-travel is over, and consumers like myself will just need to get used to the higher prices for our recreational air travel. Further, the future career outlook for would-be pilots is not an optimistic one, either, and while I would encourage "youngsters" to follow their dreams, the reality is that many will shift their dreams to other pursuits. All of this, however, should bode well for the valuation of highly-skilled, veteran pilots like yourself, for at least the short-term.

  2. I think you've hit the nail on the head, Lew. Telecom and expensive fuel will remake the travel industry...and not necessarily for the benefit of people who make their living there. Heck, air travel may eventually return to the days back in the 50s when only the well heeled could afford to go. My son, now at the Air Force Academy has a decision to make. I'd be thrilled if he became a pilot but honestly have serious reservations about recommending this career path. Still, as I always say, it beats working for a living! Take care.


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Capt Rob