The issue concerning pilot shortage is entirely fabricated. If one actually existed, wages would have gone up accordingly. There are these stories of flying being cut, but they are just hiding behind the rediculous tale. An excuse is al it is. Furloughs may happen, but I can't really be sure until it does.

 

My point exactly.
but
Cliff Claven reads the headline and then post it as if it is gospel without EVER doing any research.

 

In a perfectly competitive market you would see wages linked to supply and demand. The market for pilot jobs is controlled by a few customers, with no balancing power from unions with power to withhold services. This is basically the situation that existed early in the industrial revolution, before unions were legal. Your argument assumes a link between supply and demand, and wage levels. That link exists and is having an effect, but is severely distorted by an oligopoly. A pilot shortage exists and will become severe, but the imbalance of power is unlikely to allow the market to correct itself through normal means.

In this situation, wages are unlikely to rise to a level that will bring supply up to meet demand. More likely, the few corporations that control this market will adjust other factors to bring demand down to meet supply. Congress is being asked to consider single-pilot operations at Great Lakes. If this is approved, it will severely cut demand and opportunities at entry-level positions. Other fixes include reducing crew rest, increasing days on duty, increasing retirement age, approving MPL cruise pilots, lowering minimums for ATP, and loans for pilot training. I'm sure there are more creative solutions yet to be proposed. Unfortunately, most of those solutions further reduce incentives for new entrants to this profession.

 

It been years since I took macro & micro, and while your theory is right it does not apply here. Free market supply and demand can certainly be suppressed if artificial conditions exist, and some do such as Railway Labor Act, small numbers of demand customers and slow reaction in the supply side due to pilot training lag. But on the demand side, in this case about 25 regionals, is the option to raise prices (wages) if they wish. There is no cap on wages. Yet despite their freedom to raise prices, they do not and it is a voluntary decision.

Truck drivers were for a long time paid wages established by a fluid and slowly evolving demand and supply interaction in the labor market in the US, where were millions of drivers and thousand of companies participated and prices were naturally established. In the mid 1990s there developed a widespread shortage of truck drivers, and yet the market failed to react fast enough. The surprising thing was how long it took for the demand side, the trucking companies, to raise the pay. It looked rather dire at the time. Finally one of the largest firms, JB Hunt Transport of Arkansas, dramatically and suddenly raised its wages by almost double. It was widely accepted as smart move and the company flourished. Everyone on both sides was surprised at both this action and the success it enabled. In following years all the trucking companies followed suit and raised wages.

Correct and that's exactly what we are seeing. By hook or by crook these regionals will delay wage increase. It is the last solution on the list and for good reason- salary and wages are a huge cost in the airline business. In the trucking example we saw that market reaction to inadequate supply is not always rapid, even in fairly fluid market conditions. I suspect a dramatic wage increase is coming for the regional airline pilots, but not until all other avenues are exhausted.

Money talks and the problem can be fixed. However, there will be a lag in flight training supply as word gets out about the salary change and the flight schools tool up for more business.

 

Not really. Those regionals are in multi-year (sometimes decade+) contracts with their major partners...they typically can't pass the costs on to their customer. They can probably afford to pay new hires $26K instead of $23K but beyond that they will lose their collective butts. Unless the major partners, out of the goodness of their heats, decide to give the regionals a bigger allowance to cover the difference.

If enough flights cancel I suppose that might happen but since we still have vast numbers of 50-seaters to purge the majors may prefer to let nature take it's course: Broke regionals lose their contracts and shut down, flush regionals take over 70-seaters as needed and operate at a loss effectively transferring their cash reserves to mainline. If the surviving regionals, operating all 70+ seaters, eventually get to the point where THEY have to liquidate then the majors would have to step in and pony up. But they might be willing to let the bloodbath happen if they think they can manage the fallout (schedule disruptions).

The balls to keep your eye on are the 50-seat inventory and the savings accounts of the bigger regionals.

 

Your prediction that a few regionals working on smaller contract margins will fold is probably right, and we see Great Lakes going down the tube as we speak. But the bigger issue than wage caps imposed by existing contracts is a genuine fear by these companies of major cost hikes. They fear it will be unsustainable. Per the example seen in the trucking industry however, where we see a doubling of wages can lead to greater sustainability, they may choose this path and find the solution they need to remain viable. In the short run they will lose money but in long term they will have a stronger position by raising wages drastically.

 

I agree with you in principle, but companies no longer makes decisions for the long run. Management makes decisions for next quarter's bonus; and that means status quo will continue. When the company goes under or said manager gets fired, he will just go somewhere else and do the exact same thing to get next quarter's bonus.

Wash, rinse, repeat.

 

It's not just airlines that do that.

Our regional manager just told us there will be no annual bonuses for all Engineers, Pilots and Technicians because our margins weren't high enough. Of course he cut them without losing his.

And he had the gall to tell us that we would be getting no bonus. Less than a day later, I got an email that he CC'd me on vice our division VP (same first and last, different middle name) thanking him for a very large (like half my annual pay) bonus.

And he wonders why anyone who gets a job offer elsewhere acts like a rat fleeing a sinking ship.

Two years ago this was a decent place to work. Now, after we got bought by a bigger competitor, they attempt to milk what was a very profitable division dry to make up for losses elsewhere, and it's **** like that.

To put things in perspective, his bonus could have bought a very nice used 172, with all the goodies.

Mine could have at least paid for a 737 type rating.

Greedy ****ers aren't only in the airlines.

 

Why would they mention a shortage of pilots if there was none? They said they are having to cancel flights all across their feeder system, because of a lack of pilots. Their flights were being cut no matter what they wanted. So, they decided to cut the flying in/out of CLE, and shift those pilots to their more profitable flying.

I don't think announcing a pilot shortage, when there is none, is a smart business decision re: their stock price or their investor confidence. If it was just about economics they would have just said we are cutting our unprofitable flying and leave it at that.

 

Come on. Here's the first several off the top of my head. The "pilot shortage"

1. sends a message to mainline they deserve a better contract for the same product due to higher labor costs.
2. drives down those operating costs by increasing the quality of pilot labor, and in turn drives down training costs.
3. sells regional jet transition courses which several companies receive kickbacks from.
4. makes recruiting cheaper.
5. promotes airline position against organized labor via excess supply.
6. increases reserve labor supply.
7. maximizes industry position vis-a-vis FAA regulation.

But here's the key- it is a message only, not the actual shortage situation. A real pilot shortage is a serious problem for the airline industry and something it dreads terribly. The appearance of a shortage is the desirable commodity and not an actual shortage.