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Xceler8x
Xceler8x UltraDork
2/21/14 9:56 a.m.

How miserly airlines created their own pilot shortage

The nation's big airlines want you to know that there's a dreadful pilot shortage and they apologize profusely if their commuter-carrier partners cancel flights to your hometown airport due to the debilitating shortfall.

The nation's big airlines don't want you to know that their commuter carriers, which operate half of all the nation's commercial flights, often pay pilots so little that it's often financially wiser to drive a truck or flip fast-food burgers than fly a plane. And the bosses of the nation's big airlines certainly prefer that you don't conflate the fact that they're cashing in big time with the reality that they continue to insist on financial concessions from their existing pilots.

In case you missed the impossible-to-ignore, cut-to-the-chase conclusion, the pilot shortage is another nasty side effect of the airline's industry race to the bottom of everything from employee wages and benefits to passenger service and comfort. And airline bosses are shocked—shocked!—to find that potential aviators aren't flocking to an industry that offers minimum wages to new employees who've spent hundreds of thousands of dollars to qualify for the job.

Let's start with the immediate business-travel crisis, shall we? In the past few days, at least three carriers have abandoned routes or grounded aircraft due to a lack of pilots Wyoming-based Great Lakes Airlines (Nasdaq: GLUX) dumped six cities in the Midwest and Plains States due to what it called "the severe industry-wide pilot shortage." Republic Airways (Nasdaq: RJET), which flies commuter service for all four of the surviving legacy airlines, is grounding 27 planes and blames the lack of pilots. And United Airlines (NYSE: UAL) claims the decision to eliminate its Cleveland hub is at least partially due to a lack of aviators.

The airlines never mention salaries, of course. Their explanation: a wave of retirements as pilots reach the mandatory retirement age of 65; new federal regulations that require additional crew rest; and federal safety edicts that increase pilot training time. There's some truth in those excuses, but they were hardly unpredictable occurrences beyond the airline industry's control. Anyone with an actuarial chart could have seen the retirements coming and acted to stock up on younger fliers. The new federal rules that increase the rest that pilots must have connect with shifts that went into effect at the beginning of the year. But they were announced two years ago. The new pilot-training rules, which require a minimum of 1,500 hours of experience compared to the previous threshold of 250 hours, went into effect on August 1, 2013. However, they were more than four years in the making after the fatal 2009 commuter-aircraft crash near Buffalo, New York. In fact, everyone from U.S. senators to the Transportation Department's inspector general criticized the slow rollout of those regulations.

And you know what H.L. Mencken said: "When somebody says it's not about the money, it's about the money." The pilot shortage is most definitely about the money. There are many sources of data on pilot salaries, but let's look at statistics pulled together by airline consultant Kit Darby and analyzed by the travel site Skift.com. A first-year co-pilot at a commuter airline may earn as little as $19 per flying hour. After five years with a commuter airline, the average salary is just $40 an hour. For the lowest-paid pilots at a carrier such as Mesa Air Group, which operates flights for both United and US Airways, a 60-hour work week means an effective pay rate of just $8.50 an hour. That's barely above the national minimum wage of $7.25 an hour and below the more than 10 bucks President Barack Obama is making federal contractors pay their workers.

Faced with what it claims is this catastrophic, route-shedding, plane-grounding, hub-killing shortage of aviators, you'd think the airline industry would react with across-the-board pay increases. After all, isn't that how it works in a capitalistic society? When faced with a labor shortage, companies raise their pay scales to attract more workers. You'd think this would be especially true for airline pilots, whose learning curve is steep and expensive and in whose hands rest the lives of passengers and the reputation of their employers.

Yet instead of raising pilot pay rates, airlines are insisting on concessions. One example: the particularly ironic developments at American Airlines Group (Nasdaq: AAL), the parent company of the recently merged American Airlines and US Airways. According to the Dallas Morning News, the crew that arrived from US Airways back in December to run American Airlines and AAL netted a cool $79 million in stock sales during the last month. That covers chief executive Doug Parker, president Scott Kirby and four other top managers. At the same time, however, American pressed for another concessionary contract at American Eagle, its wholly owned commuter airline. When the leaders of the pilots union last week decided not to put the contract to a vote of rank-and-file aviators, American management immediately retaliated by deciding to reduce the size of the American Eagle fleet. American's newly enriched managers also claimed that they would search for cheaper commuter carriers to do American's flying. Whether that is a real-world possibility given the industry-wide pilot shortage remains to be seen. But the incongruity of newly arrived US Airways bosses feathering their financial nests while demanding concessions from their scarcer-than-hen's-teeth pilots did not escape the notice of commentators on a leading airline bulletin board.

American's new bosses "are just cashing in on the fact that they haven't given raises [at US Airways] since 1991," one poster claimed. "They terminat[ed] most of the company contribution to our retirement plan, canceled retiree health care benefits and contracted our work to companies where workers qualify for food stamp[s]." The commentator's bitter conclusion? "This is where we are in America."

z31maniac
z31maniac UltimaDork
2/21/14 10:01 a.m.

Well those lazy pilots should just open their own airline.

/sarcasm

bgkast
bgkast GRM+ Memberand Dork
2/21/14 10:04 a.m.

Berk 'em

GameboyRMH
GameboyRMH GRM+ Memberand MegaDork
2/21/14 10:10 a.m.

Many years ago I decided not to train to be a pilot because of this.

BenB
BenB New Reader
2/21/14 10:12 a.m.

It is criminal what they pay commuter pilots, given the responsibilities they have, but this has been going on since at least the '80s. USAirways was bad back when I flew for their commuters after they bought Piedmont and they're worse, now. Every time I run into a friend who is still flying, I hear the same "Dude, be glad you're out" from every one of them. Sorry for the rant. The way companies treat their pilots, not to mention their flight attendants, has always been a sore spot for me.

N Sperlo
N Sperlo MegaDork
2/21/14 10:13 a.m.

My wife did a year as a flight attendant. She made 15k after taxes while I was unknowingly having seizures in my sleep and she was away from home too often for us to find out. berkeley the companies.

nocones
nocones GRM+ Memberand SuperDork
2/21/14 10:23 a.m.

Didn't we have a thread a while back bitching about bag fees?

This is the reality of rhe American consumers race for the bottom. We demand everything be cheap because we are greedy. We demand high returns on or investments because we are greedy. Companies demand high profits because they are greedy and reward their higher ups because they are greedy. Something has to get squeezed and its generally pay of the people on the bottom who do.

I like to think that pilots should be payed well as they take care of the safety of their travelers. I'm not sure what wage is fair but it seems more is necessary if there is shortages of talent. Flight attendants are the face of your company and probably should be paid well too. How many of you are willing to pay 10% more for air travel to make it possible though?

N Sperlo
N Sperlo MegaDork
2/21/14 10:54 a.m.
nocones wrote: I like to think that pilots should be payed well as they take care of the safety of their travelers. I'm not sure what wage is fair but it seems more is necessary if there is shortages of talent. Flight attendants are the face of your company and probably should be paid well too. How many of you are willing to pay 10% more for air travel to make it possible though?

I have to argue. The only way in which the pilots are in charge of your safety is by flying the craft. Once those doors shut, the FA is in charge of your safety.

If anything happens, the pilots are locked in that cockpit and the FA is all you have.

Mitchell
Mitchell UltraDork
2/21/14 11:10 a.m.

Sounds like airlines are forcing supply and demand in their favor by cutting the supply of flights. As for reasoning, they will cite new regulations and mandatory wage increases or something similar. Blaming the government, it's so easy!

DaveEstey
DaveEstey UberDork
2/21/14 11:19 a.m.

Orrrr you could read the real reason for the shortage: http://www.faa.gov/news/press_releases/news_story.cfm?newsId=14838

Mitchell
Mitchell UltraDork
2/21/14 11:28 a.m.
DaveEstey wrote: Orrrr you could read the real reason for the shortage: http://www.faa.gov/news/press_releases/news_story.cfm?newsId=14838

So the stricter regulations have been in the making since 2010. Were there no drafts that the airlines could review, and set timetables for being prepared?

Streetwiseguy
Streetwiseguy UberDork
2/21/14 11:41 a.m.

The Walmart-ization of the air. I don't worry about underpaid pilots nearly as much as I do about underpaid groundcrew/mechanics.

Tell you what- charge me 30% more, feed me, give me a bit of leg room, and for chrissakes change the oil in the jet.

N Sperlo
N Sperlo MegaDork
2/21/14 11:43 a.m.

In reply to Streetwiseguy:

You don't need to worry about them. I've bumped into maintenance guys from Lambert StL. They have it covered. The airlines try to keep plains in the air and argue with those guys. Things such as major gasket leaks.

z31maniac
z31maniac UltimaDork
2/21/14 11:58 a.m.
nocones wrote: Didn't we have a thread a while back bitching about bag fees? This is the reality of rhe American consumers race for the bottom. We demand everything be cheap because we are greedy. We demand high returns on or investments because we are greedy. Companies demand high profits because they are greedy and reward their higher ups because they are greedy. Something has to get squeezed and its generally pay of the people on the bottom who do. I like to think that pilots should be payed well as they take care of the safety of their travelers. I'm not sure what wage is fair but it seems more is necessary if there is shortages of talent. Flight attendants are the face of your company and probably should be paid well too. How many of you are willing to pay 10% more for air travel to make it possible though?

I'd gladly pay 10% more because I typically only fly 1-2 times per year.

Duke
Duke UltimaDork
2/21/14 12:02 p.m.

Soooo... WHO EXACTLY is willing to pay X% more for their airline tickets in order to pay for improved salaries?

I love these "evil corporations are evil" threads. 95% of them always boil down to what consumers have demonstrated they are willing to pay for, no matter what righteous indignation prompts the initial post. Consumers don't want to pay more than the bare minimum for commodities and commodity services. EVERYTHING in the business world derives from that.

Go bitch at consumers. Why wasn't the title of this thread MISERLY CONSUMERS DON'T WANT TO PAY ENOUGH FOR AIRLINE TRAVEL...?

pilotbraden
pilotbraden SuperDork
2/21/14 12:34 p.m.

The new FAA regulations to get an ATP are excessive. I am glad that I have my ATP. The following is a pretty good article about the changes in the regulations.

http://www.avweb.com/news/features/The-New-ATPA-Brief-Window-Before-the-Sky-Falls221453-1.html

aircooled
aircooled UltimaDork
2/21/14 12:37 p.m.

It's all of course a direct response to the increase in fuel costs a few years ago. The airlines / passengers resisted the price increases, something had to give.

Pilots have always been paid pretty poorly in the lower ranks. The only saving grace was that eventually they would make really good money as they moved up the ranks before they were forced to retire at 65 (FAA Reg).

pinchvalve
pinchvalve MegaDork
2/21/14 12:59 p.m.

Why do people want to become pilots? To fly jet fighters. But that's doesn't translate well to civilian aviation because USAir and Delta don't operate fighters. Solution? BUILD STRETCHED F-14s FOR COMMERCIAL AVIATION! I am thinking 12 seater, Pittsburgh to Tampa at Mach 2.2, maybe pay a little extra to shoot down a drone plane or strafe a ship offshore en route. Chairmen Preferred, here I come!

N Sperlo
N Sperlo MegaDork
2/21/14 1:01 p.m.
pinchvalve wrote: Why do people want to become pilots?

Yea. They could be driving a 2014 Kia Rondo!

Xceler8x
Xceler8x UltraDork
2/21/14 1:14 p.m.
Duke wrote: Soooo... WHO EXACTLY is willing to pay X% more for their airline tickets in order to pay for improved salaries? I love these "evil corporations are evil" threads. 95% of them always boil down to what consumers have demonstrated they are willing to pay for, no matter what righteous indignation prompts the initial post. Consumers don't want to pay more than the bare minimum for commodities and commodity services. EVERYTHING in the business world derives from that. Go bitch at consumers. Why wasn't the title of this thread MISERLY CONSUMERS DON'T WANT TO PAY ENOUGH FOR AIRLINE TRAVEL...?

We really don't have to pay X% more for tickets. The airlines are pulling in record profits for their industry these days.

Good times for the airline industryGood times for the airline industry

From the article. said: THE much-maligned airline industry is in the middle of a resurgence—according to the airline industry itself. The International Air Transport Association (IATA), the trade group for the world's biggest airlines, said this month that it expects industry profits to hit a record $19.7 billion in 2014, an increase of more than 50% on the $12.9 billion estimate made for 2013.

If the airlines were willing to pay their pilots more, they could. They would just have to lower their profit expectations and the salaries of their leadership to pay for it. It's entirely within their ability to do so without raising prices to the consumer.

I'd also argue that lower airline ticket prices are a result of a lack of spending power in the majority of leisure travelers. Companies are sending their employees to travel as much as ever. The leisure traveler traffic isn't there because the largest class in the U.S., the middle class, doesn't have money to spend on that and is shrinking as we've discussed before. Delta tried to raise it's prices in 2012 but no other airline followed. Delta lowered it's prices supposedly because bookings fell off. Whether that's true or not we'll never know.

Also, keep in mind that while pilots are paid barely above minimum wage to start the avg CEO pay for an airline is $5 mill.

Now let us consider how US Airways CEO got a pay raise of 44%. He justified it by saying:

US Airways CEO Gets 44 Percent Pay Bump; Merger Makes Him Leader Of World's Biggest Airline said: "My 2012 incentive pay was driven 100 percent by our financial performance, and 2012 was a record-setting year for US Airways," Parker wrote. The company earned record net income of $637 million last year. http://www.huffingtonpost.com/2013/04/16/us-airways-ceo-salary_n_3090910.html

Even though US Airways is making enough profit to raise the CEO's pay by almost 50% evidently they aren't making enough money to give the pilots a raise. You can see by US Airways asking for starting pilots to make even less than they currently do. Starting pilots make so little money they qualify for food stamps.

US Airways proposes reduced pay rate for new pilot hires at American Eagle said: In the ongoing discussions between US Airways management and the American Eagle pilots union, US Airways is proposing a reduced pay rate for new pilot hires at the regional carrier.

So, Airlines like US Airways could pay their pilots more without raising ticket prices by:

  • Lowering CEO compensation to sane levels.

  • Lowering their expectations for profit.

Xceler8x
Xceler8x UltraDork
2/21/14 1:16 p.m.
pinchvalve wrote: Why do people want to become pilots? To fly jet fighters. But that's doesn't translate well to civilian aviation because USAir and Delta don't operate fighters. Solution? BUILD STRETCHED F-14s FOR COMMERCIAL AVIATION! I am thinking 12 seater, Pittsburgh to Tampa at Mach 2.2, maybe pay a little extra to shoot down a drone plane or strafe a ship offshore en route. Chairmen Preferred, here I come!

Like this?

Isn't that Stephen Colbert's personal aircraft?

GameboyRMH
GameboyRMH GRM+ Memberand MegaDork
2/21/14 1:17 p.m.
Xceler8x wrote: So, Airlines like US Airways could pay their pilots more without raising ticket prices by: * Lowering CEO compensation to sane levels.

OH NOES SOWSHALISM!!!

Xceler8x wrote: * Lowering their expectations for profit.

They'd have to go private first like Dell did.

chrispy
chrispy Reader
2/21/14 1:25 p.m.

A high school friend just left Air Tran, after 12 years of flying 717s, for Southwest. He mentioned spending 9640 hours flying that plane. Now, if thats the case, its 15.4 hours a week flying, figure double for paperwork, etc. I only offer it as a data point. I admire pilots as much as first responders. He didn't mention why he left but now he's based out of Dallas rather than Atlanta.

z31maniac
z31maniac UltimaDork
2/21/14 1:46 p.m.
Xceler8x wrote: Starting pilots make so little money they qualify for food stamps.

Well they should just get different jobs then! No one told them they HAD to be pilots!

/sarcasm

mad_machine
mad_machine MegaDork
2/21/14 2:00 p.m.

that is scary. I make more an hour (a lot more) than a pilot.. and nobody's life is in my hands.

I do not begrudge anybody a decent salary (even a CEO) but when it starts to hurt the company (or the country)as a whole Something needs to be done.

I wonder what the revolution will be like?

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