“Pilot Shortage Halves Republic Airways Stock” is a Wall Street Journal article about how Republic, a regional jet operator, can’t find enough pilots to keep the planes going. In theory they could just offer a $20,000 signing bonus and have all the pilots that they needed, but presumably their union contract with pilots would prohibit that (since the more senior pilots would say “We should get the $20,000 instead”; see “Unions and Airlines” for my article on this toxic combination for shareholders).
I’m also wondering where these low-level pilot jobs will end up after the latest rounds of employment market intervention by the government. The union contract may say $19 per flight hour, for example, roughly $19,000 per year given the typical 1000-hour schedule. But due to the abysmal schedules assigned to new pilots in the U.S. (so that senior pilots can work minimal numbers of days), it might take 22 days per month at 14 hours per day to get in the full amount of flying. That’s about 3700 hours per year of deadheading, waiting around airports, and doing other stuff for the employer’s convenience. At the new $15/hour minimum wage, that’s $55,440 in straight time plus required overtime pay for a lot of those hours? Thus I am wondering if the argument over the typical low wages for entry-level airline jobs is moot. It may soon be illegal to pay anywhere close to those wages.
Labor is at least 20 percent of a U.S. airline’s cost (WSJ 2012; probably more right now due to the collapse of fuel prices). So it seems reasonable to expect ticket prices to go up.
Can they just part-time them all? Also, why not bust the unions? If you’re paying a junior pilot 19,000/year for a slog of a job, how exactly are you helping them? Seems like an industry ripe for disruption.
Could a disruptor chuck the union and costco his workforce by hiring slightly better-paid but part time junior pilots with flexibility. (If you’re willing to work full-time for 19k, it’s probably just a hobby, so how about part time for 12k with a better schedule?)
Need to encourage full time employment.
Part time needs to be like overtime, you pay more per hour, not less.
Since the part timer pays his own benefits, then they actually get paid more per hour. If you really only need part time, then it’s worth it for the business. If you pay part time because it’s cheaper labor, then this practice discourages that. It’s no longer 50% cheaper, due to no benefits.
Same for overtime. Employer paid the benefits up to full employment, and w/o OT, labor becomes much cheaper. Encourages more employees to be hired, if you need them, rather than overworking the ones you have.
SuperMike: As noted in the referenced article, FAA regulations make it illegal for an airline to hire replacement workers, even pilots who have been trained by another carrier to fly the same aircraft to the same airports. Part-time workers don’t make a lot of financial sense if you can get full-time workers at $19,000/year or close. The annual recurrent training for a jet is about $10,000. Also remember that every employee has to be on a random drug testing program, etc.
If the government mandates a minimum wage and changes in the treatment of deadheading time, etc. then the pilot’s union will be powerless to insist that the junior pilots get paid less. $55K plus per year should be plenty to clear the market. So the airlines should lobby for these changes in the law (or fail to vigorously defend suits demanding such treatment as an interpretation of existing wage and hour laws) as an end run around the union.
Maybe what is needed is uber for planes. Each pilot damp leases his aircraft from the airline and is exempt from wage laws. The airline deducts expenses for fuel, maintenance, reservation fees, etc. and the pilot keeps what is left if anything.
I worked for the airlines in managenent for the greater part of my career, and the unions are always a thorn in the side. I can’t even begin to list all the crazy demands made by the unions for the sake of their membership AGAINST the greater good, logic, full employment and economic sense.
This recession has really hit many people hard, leaving many skilled and experienced people unemployed. And yet the unions are preventing more people from getting employed. As for me, I used to be a mid-level manager; now I’m doing pressure washing to make ends meet.
If 20% goes to labor and 50% to fuel costs, where does the remaining 30% go?
The remaining 30% goes to airplane financing, humonguous IT systems, and monopolistic gate leases and enroute charges, among other things.
Warren Buffett said it best: “To become a millionaire, be a billionaire and buy an airline.”
Historically, the other players (vendors, aircraft manufacturers and lessors, airports) have been much more profitable than airlines.
You are talking about pilots as generic labor, they are not. It takes a relatively talented young person 6-8 years and around $200k to become qualified to fly as an airline pilot. There are very few young Americans in pilot training, most schools in the U.S. are overwhelmingly training foreign students. Raising pay will not cause young people to leave their current professions and apply to be airline pilots, it doesn’t work that way. If pay and conditions were suddenly excellent for airline pilots, it would take a decade to attract tens of thousands of young people, and train them to become the thousands of pilots needed (assuming historic 10% pass rate).
It is not just Republic that is cutting flights for lack of pilots, schedules at all the regionals are being cut due to lack of pilots. This is not a regional thing. The regionals fly passengers for major airlines only, on tickets sold by the majors. There are no regional passengers, or routes, or destinations. When a regional airline loses a pilot, a major airline can sell fewer tickets, their network has lost capacity. Regional pilots are moving up to major airlines, but not fast enough to offset needs there for growth and retirements. Major airlines don’t and won’t have enough pilots to take over regional flying.
Comments about airline unions need to include the effect of the Railway Labor Act. Unions at major airlines cannot strike or slow down, or impede operations in any way, without a years-long and difficult to impossible process. They have no real impact on operations other than to keep workers placated and productive. The fact that they are paid a fraction of what they used to earn, and less than minimum-wage for many pilots at the regionals, should be evidence enough of that.
Based on my experience in the U.S. Air Force, I feel that the airline seniority system is the best way to promote pilots.
The Air Force uses a subjective system that is too often dominated by emotional factors, nepotism, and ‘looking good’. Flying skill is secondary at best.
The seniority system is far from perfect, but I don’t think a safer system for pilot assignment exists.
Phil, you reference your “Unions and Airlines”, which I was just reading. I was wondering why the senior pilots controlled things in the union, since it seems like the annual elections would give junior pilots some leverage too.
I see that a “Capt Kaos” commented on that article along these lines, but you never gave a response to him? Is he accurate in saying that senior pilots in regional shops make about $100,000, and not $300,000?
John: Of course senior pilots in regionals make fairly minimal dollars (even $100k is too high, I think). But it is all one big union (ALPA) so the $300k senior captains at the mainline airlines get to do things like forbid regional airlines from operating planes with more than 76 seats.
Could junior pilots occupy senior positions in unions and on negotiating committees with management? I don’t know enough to say if that is theoretically possible. I know that in our corner of the union this was not the case.
The situation with pilots is similar to the situation that the Freakonomics guys describe in their essay “Why do drug dealers live with their mothers?” , given that the illegal drug trade appears to be lucrative. Their answer was that junior drug dealers are very poorly paid but that every junior drug dealer believes that he is going to end up at the top of the pyramid and become a senior drug dealer, so they remain drug dealers and don’t quit and get a more lucrative job at McDonalds.
The idea that someone would spend years of training in order to get a job that pays $19,000 /year for 60+ hrs / week (if you included deadheading, etc.) is ludicrous and can only be explained if the pilots are under the illusion that they are someday going to end up making $300k so the struggle is worth it. But there is apparently a limit to the # of pilots willing to put up with such delayed gratification.
I wonder whether the “pilot shortage” is really a trial balloon put up by the airlines so that they can start importing H1-B pilots? If they are running out of Americans who will take this on for $19K, they can import Indians, etc. , send them to pilot school and the “shortage” will be miraculously solved.
After WWII, London Transport recruited men from the West Indies to man the Underground and London buses. They said there was a shortage of manpower in the UK but what there really was was a shortage of workers willing to work for what London Transport was offering. It’s always that way.