Compensation Shortage for Pilots
Much commentary today focuses on the growing shortage of pilots and maintenance technicians in the aviation industry. According to a recent Reuters report, Boeing reports that the aviation industry will require a net increase of 637,000 new pilots in the next twenty years to keep pace with the increases in global demand. This calculation does not account for simultaneous shortages in trained military pilots and relies on a forecast that doubles passenger and freight demand.
The projected retirement of 42% of current commercial pilots during the next decade is also factored into this shortfall.
As a result, some airlines are experiencing pilot shortages and have eliminated routes and reduced service as a result.
Why Did the Shortage Occur?
Following the financial crisis and as a result of losses incurred in the prior decade, the airline industry instituted hiring and wage freezes that caused potential new pilots to move their careers elsewhere. And, given the relatively high cost of pilot training, candidates could not justify the expense of pursuing a career that seemed to have limited openings.
Military aviation is also suffering from eminent shortages in trained pilots. While many of the commercial pilots of the past were former military fliers, one CNN report states that the U.S. Navy will have a 10% pilot shortage by next year and the U.S. Air Force will need one-thousand additional qualified pilots by 2022.
Since 2010, as the global economy recovered, airlines are expanding operations while air freight has also increased dramatically. The demand for aviation jobs is increasing at a substantial rate.
Shortage of Pilots or a Shortage of Compensation?
Supply and demand are alive and well in the aviation industry. Without a substantial influx of pilots and other aviation workers, airlines and freight companies are now participating in global bidding wars for existing, experienced pilots.
The 2018 median salary range for U.S. airline pilots, according to Chron.com, was $130,059. While seeking to provide experienced pilots in a rapidly expanding market, airlines in China, for example, are offering experienced foreign pilots an annual salary of over $300,000 tax-free. These bidding wars are coercing experienced pilots to leave their existing companies to work elsewhere at higher salaries and benefits. Less profitable companies are losing the bidding wars and could be in a battle to survive the coming years.
Of course, the other side of the coin is that with higher wages for much-needed pilots and staff, aviation companies will likely raise fares and freight costs to remain profitable and survive, thereby slowing the projected growth.
Aviation companies have the choice of continuing a bidding war or develop strategies to increase the supply of qualified pilots. To this end, several airlines and Boeing are setting up affordable pilot training programs to entice more interested candidates. While current pilot training programs generally cost about $100,000 to complete, many believe that lower-priced, focused training will entice more qualified candidates.
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