OAG identifies the ‘ticking time bomb’ ahead for airlines

Pilots have won some big pay rises as a labour shortage hits. Photo / 123RF

A report by aviation analysts OAG says the shortage of pilots is a “ticking time bomb” for airlines.

The firm estimates that the industry could be 55,000 pilots short by the end of the decade.

Chief analyst John Grant says “the aviation industry faces a crisis in the next decade and there appear to be few solutions.”

More than 60 per cent of pilots are older than 40, higher than in many other sectors, and this means a heavy concentration of human resources is heading for retirement.

“With recruitment seemingly carefully managed by the whole industry, a ticking time bomb was always looming, since the one thing no one could control was age and there is a requirement in many markets for pilots to retire at 65 or in some cases 60,” said Grant.

In this country, Aviation NZ says training schools here can be part of the solution.

“We have an opportunity to align with strong airlines as the sector ‘rationalises’”, said chief executive John Nicholson. “It is critically important that we go hard now to capture the strong airlines that will grow.”

The interest from airlines reflected the calibre of training provided in New Zealand, the country’s comparative success with Covid (making it a safe haven), and their wish to divert students from other traditional training markets, especially the United States.

“This international interest can be converted into a strategic advantage. It will also mean that increasing numbers of pilots, and the airline business leaders of tomorrow, will have a positive perception of New Zealand.”

Nicholson said Air New Zealand was staffing up again and its new pilots come from the ranks of instructors.

Anecdotally, the trainers had lost up to half of their instructors to airlines, especially Air New Zealand, in the past six months, he said.

‘‘This is putting pressure on the system in terms of retaining skilled instructors. A partial solution is for the international students coming here on student visas to get their CPLs (commercial pilot’s licences) is to retain some, train them as instructors and then convert their student visa to a work visa. However, the immigration rules require that a process be gone through,” said Nicholson.

Already, United States airlines are scrubbing flights because of the shortage of pilots.

Southwest Airlines has more than 700 planes but parks 40 to 45 of them each day because it lacks pilots to fly them, AP reports.

Chief executive Bob Jordan said this year that amounts to more than 200 flights a day or up to 8 per cent of the Dallas-based airline’s flying. Southwest expects to hire 2250 pilots this year after adding about 1200 last year, mostly by drawing from smaller airlines.

United Airlines chief executive Scott Kirby says the lack of pilots will continue to prevent airlines from expanding as much as they would like, to take advantage of strong travel demand. ”Pilots are and will remain a significant constraint on capacity,” he said during an earnings call last month.

Kirby figures that his airline, American, Delta and Southwest combined will hire about 8000 pilots this year, up from the normal 6000 to 7000.

Air India, which is expanding rapidly, said this week it will hire 900 pilots this year.

OAG says airlines such as Emirates and United Airlines are investing hundreds of millions of dollars in pilot training centres to help solve the shortage. On Friday, Qantas will make a major announcement about investing in jobs and training after last year outlining a proposal for a multimillion-dollar facility to provide training for up to 4500 new and current Qantas and Jetstar pilots and cabin crew each year from early 2024.

In spite of the new centres, Grant said both mature markets such as North America and emergent regions such as the Asia-Pacific are equally affected.

In Britain, pilot salaries range from around $52,000 for a new first officer to more than $300,000 for an experienced long-haul pilot.

Southwest Airlines recently announced that they will reduce their pilot entry requirements to 500 hours of experience from the current 1000-hour standard, which will provide a short-term injection of new resources into the airline.

Grant says in Atlanta, Delta Air Lines has struck a “once in a lifetime” agreement with their pilots for a salary increase of up to 30 per cent over the next four years with an immediate 18 per cent rise and a series of “one-off” bonus payments, part of which is a 14 per cent payment on their 2022 salary.

“This agreement has already caused ripples in other US majors: Hawaiian Airlines has agreed to a four-year deal for their pilots with a 33 per cent increase over the period, and others will surely have to follow.”

Aviation NZ’s Nicholson said international students are vital to the training sector here.

The number of New Zealanders training to the Commercial Pilot Licence level in this country has been declining year-on-year from 307 in 2010 to 153 in 2020, while international students qualifying during this time have remained relatively constant at 300.

In recent years, international students have accounted for almost 70 per cent of those qualifying with CPLs.

“Building and retaining infrastructure to train pilots is capital intensive. The monetary returns international students produce for trainers allow further investment into more advanced aircraft and equipment which domestic students benefit from.”

In 2020, the industry had $100 million invested in fixed costs. International students also encourage New Zealand trainers to train New Zealand CPL holders to instructor level so that they can instruct New Zealand and international cadets.