Summary

• A pilot shortage has begun to take its toll on legacy airline feed.
• The shortage will result in economic impact either in the form of increased costs for labor, or decreased route structure.
• While the Legacy Airlines will be primarily impacted, bargain and low cost carriers should be able to maintain staffing levels at a slightly higher cost.

Economic forces cannot be ignored indefinitely. While the past 15-years have witnessed a surplus of pilot labor due (at first) to capacity restrictions brought on by the business down cycle (following the dot com bubble bursting and later by 9/11), later to be compounded by an increase in the mandatory retirement age for airline pilots, recently this excess has rapidly dwindled to the point of a near crises with regards to hiring at the regional airline level. In short, there is a pilot shortage.

It is an interesting economic study. There really was no question that a pilot shortage was brewing, due to the fact that better paying jobs were beginning to rob the regional airlines of their pilot supply. Still, nearly 20-years of oversupply in the industry has led managers to ignore the warnings of the looming pilot shortage.

The regional feed is an intractable part of the legacy airline model. While low cost carriers will suffer slightly higher acquisition costs for their pilots, legacy carriers will likely be forced to shelve out additional money to pilot groups in order to maintain some degree of regional feed. Offsetting this is the general trend towards larger regional jet aircraft flying the same number of passengers on fewer flights (which means, fewer pilots).

As a whole, low cost and bargain carriers will be more readily able to attract pilots to expand flights, while the legacy airlines will be stymied into a flatline approach: either they will be forced to return flying to the mainline level (which is more expensive and results in fewer flight options to passengers) or they will have to produce incentives to retain pilots at regional feeds.

Pilot Shortage And The Legacy Feed | Seeking Alpha