Expert: David A. NewMyer - 8/21/2008

Question
QUESTION: Hello:
    Before I begin, please forgive me for the long question.  I am 36 years old and am almost done with my instrument rating.  After my instrument rating,  I should have my commercial/multi by early next year.  When I began my flight training, my goal was to enroll in the  Gulfstream Training Academy after earning my ratings, and fly for them after completing their training program.  This way, I could have gotten an airline job without having to flight instruct.  
    I am writing to you because I am deeply concerned about the recent cuts in airline capacity due to high fuel costs.  I have been looking through news articles online for the past few months and have found mostly discouraging and sometimes contradicting  airlines.  I don't want to spend all my life savings getting all my ratings, and end up without an airline job. I would like your analysis on the following information I have found:

1)  How is this aviation downtown different from previous ones?  It does not concern me that airlines are not hiring at this time.  After all, I am still working on my ratings.  I am more concerned that this might be a long term or permanent slowdown in global aviation, leading to a global surplus of pilots.   

2) How do you see the future of aviation if fuel prices remain at this levels or even go higher and stay there?  I have read that “deep structural changes” will have to be made in the US airlines industry.  What does this mean?

3) I have read that some analysts are predicting that airlines will have to cut capacity 30-40% in order to stay afloat.  What does this mean for someone in my situation?


4) Do you think there is a chance that in the near future, due to a surplus of pilots, airlines could require 3000-5000 hours to be hired, like they used to back in the 1980s?  When do you expect airlines to start hiring again and what do you think will be the hiring minimums?


5) What do you see as the future of regional airlines.  I have read that regional airlines are especially getting hurt.  I have also read that a lot of planes with under 50 seats will be removed from fleets because they are not profitable with high fuel prices.  Does this mean that larger planes carrying more passengers per plane means fewer planes flying and fewer pilot jobs in the future?  Do you think fuel efficient turboprops might replace a lot of smaller jets which will be phased out?

6)  Another fear I have it when airlines do start hiring, there will be a huge surplus of experienced pilots who I will have to complete with to get a flying job.  What threat do furloughed airline pilots pose to a new beginner like me?  After being furloughed do most airline pilots start at the beginning with another airline or just wait around until their airlines calls them back? Do you think a lot of them will go overseas to fly for foreign carriers?  I recently read that furloughed American pilots are applying with Australian carriers.  



7)  I have read that airlines through Asia, Africa Australia Canada are short of pilots and are hiring foreign pilots.  Even a wealthy country like Japan was facing pilot shortages.  Is it fair to assume that if fuel prices stay this high, the shortage in Asia and Australia Africa Canada  will also end up in surplus of pilots?  

8) I have read that in emerging markets, millions of people will be afford to fly in the next few years and at the same time there are not enough facilities to train pilots in those countries.  Do you think that there is hope for me there if there are not jobs here? I have lived overseas before for 5 years and can adjust very well to different cultures.  I would much rather fly, lets say a King Air somewhere in Africa or Asia instead of having to flight instruct here.  

9)  I know pilot shortage in this country is over.  How about the global pilot shortage that was being talked about only recently by the international air transport association?  ?  A news articles  as recent as May of this year in the Wall St. Journal was talking about coming global pilot shortages and the IATA predicting need to train 19,000 pilots annually.  I have also read predictions from Boeing and Mitsubishi that state that there will be a strong markets for both large aircraft and regional aircraft.   Is it possible for there to be a slowdown in aviation and still be a demand for pilots due to pilot retirement?  

10)Finally, what do you think is the best case scenario and the worse case scenario for someone in my position?  What scenario do you think will play out?  


Thank you ever much for your help!  Your answers will help me make the most important decision of my life.  

Sincerely

Andy Norris

ANSWER: Hi,

Thanks for your many questions.  I will try to assist....normally, I try to answer one question at a time, but you have ten or more here.  I will try to handle them this way:

1.  Do what you love.  The bottom line is:  If you love to fly and you want to fly, then, continue on this course.

2.  The aviation industry is very cyclical and has been since I have been in it...for one reason or another, there have been downturns in the early part of every decade since the 1970s (sometimes more than one downturn in a decade), followed by upswings in hiring. I think we are in another one right now.  However, it is a bit different in that some airlines ARE still hiring (such as Southwest, UPS and FEDEX as well as some regionals)...but, at a much slower pace.

3.  As far as the pilot shortage being "over in this country" I would not say it is over by a long shot.  There are a couple of things that will keep the shortage going:

A.  There are still retirements facing the large airlines.  While the age 60 rule has now changed to an age 65 rule, all that did was put off some retirements a few years.  There will be another bulge in just over four more years, believe me.  And, some airline pilots are larger airlines are retiring early (before age 65) in order to take advantage of early retirement offers and that sort of thing.  So, we will need some hiring to replace retirements.

B.  There is the corporate and business aircraft market.  FAA forecasts indicate that the turbine-powered business and corporate aircraft market will grow from just over 10,000 aircraft to something like 29,000 aircraft by 2025.  If that is the case, or even if only half of that growth occurs, then, there will need to be considerable hiring done in THAT segment of aviation, which will be very competitive pay and benefit-wise with the airlines.

C.  The reaction to the current bad news in aviation will keep some people out of the industry (following the very negative things that you have noticed in the press).  With less people coming into aviation, that will leave more opportunities for those who "stick it out" during the downturn.

D.  As you note, the international market is still strong and is competing for US trained pilots. Note that Boeing and Airbus order books are filled until the 2013 or 2014 timeframe.....largely by international airlines.  So, there WILL be new aircraft to fly, but, largely by foreign airlines ( a few US airlines like Southwest and Continental have orders....).

4.  Speaking of downturns, being in school or training during a downturn is the best place to be....you are getting ready for the next upswing in aviation during the time when the industry is not hiring.  The worst thing for you to do is to wait for the next upswing and THEN go into training...that would be bad timing.  When the next upswing happens, you want to be READY for the job market.

5.  As far as the competition from furloughed airline pilots is concerned, remember that most airline pilots are like you:  They need to eat. So, they may well fly for a living for anyone while waiting for their airline to call them back....but, when that airline calls back, more than half go back. This leaves jobs open where they were working....this helps to define the upswing in hiring to some degree.  In other words, the movement in jobs including furloughed pilots getting called back or regional airline captains going to Southwest...all that leaves jobs open for upgrades for people coming into the industry and willing to move up.

6.  As far as what to watch for in the near future, I think that the behavior of the airlines after Labor Day will be critical.  I think that air fares will HAVE to go up so that airlines can pay the bills.  I realize that the price per barrel of oil has gone down recently, which is great news.  But, the airlines will have to raise prices anyway to deal with $100 to $120 oil (since their business model was for oil at $70 or $80 a bbl).  So, the consumer reaction to these prices will be what drives airline action and reaction.  I am thinking that business travelers are the ones doing a lot of the flying after Labor Day and will be, in general, less sensitive to price increases.  What will be interesting is whether or not most airlines will raise prices...if they all do it, then, the airlines will be able to remain relatively stable and recover themselves financially.  If there is some sort of price war in the Fall, then, that will be fatal to some airlines.  Any airlines going out of business will throw pilots out on the street who will then compete for the remaining jobs.....so, watch for that.  I think that the streets can handle one of those bankruptcies but not any more than that.

So, in conclusion, it is back to basics:  If you love it (flying) and that is what you want to do with your life, continue on.  Just be a bit flexible with your job research and investigate the possibility of business and corporate aviation along with flying for the airlines.  It might present some good options for you.

Best wishes,

David A. NewMyer, Ph.D., Professor and Chair
Aviation Management and Flight
Southern Illinois University Carbondale
http://www.aviation.siu.edu


---------- FOLLOW-UP ----------

QUESTION: Hello:
   Thank you for your quick and detailed response!  I just have a few follow up questions.

1) Oil prices have been coming down recently.  If by this time next year, prices are down to $70-$80 / bbl, do you think that airlines will quickly rehire all the pilots they have laid off and start hiring new pilots again?

2) If oil prices stay above $100 bbl, do you think that there is a chance airlines will require 3000-5000 hours minimum for hiring like they used to in the 1980s?

3) What is the worse case and best case scenario for someone like me?  Which scenario do you think will most likely play out?

Once again, thank you for your help.

Andy Norris

Answer
HI,

Thanks for the follow up questions.

1.  I do not think that the airlines will do this "quickly" as there will be other aspects to their decisions including air fares vs. capacity, how the Delta/Northwest merger is doing, and related issues.  But, my perspective is that some rehiring will happen and some airlines will hire new pilots.  Actually, Southwest Airlines has continued to hire new pilots, so, from that perspective, there is still some airline hiring going on out there.....some regionals still need pilots as well.

2.  I think there is a good chance that oil will remain around $100 bbl, so, my perspective is that there will continue to be some high time hiring at Southwest and others.  Lower minimums will not come about until there is broad hiring across all airlines, which might be a while.

3.  Hard for me to say.  I would say that you might want to think about jobs beyond the airlines in, say, corporate or business aviation, as well as airlines.  I am thinking that there will be jobs at regional airlines for some time to come as major and other airlines off-load flights onto the smaller carriers.  Therefore, your training ground will likely be at the regional airlines.  The idea there would be to try to find your way to a very good one like Skywest or ASA or Comair in order to have the chance to have decent pay as you are building your flight time at the regionals.  Once you build your flight time up (especially PIC turbine time), then, you can choose to go to the larger airlines or on to the corporate or business world.

All the best,

David A. NewMyer