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."
