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Old 04-02-2008, 07:16 AM   #1  
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Default pilot shortage?

Warning to Airlines: Flight Instructor Shortage Could Create Long-Term Problems

posted on: April 02, 2008 | about stocks: DAL / LUV / NWA / UAUA

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I don’t normally comment on fundamental analysis here, despite having been a small cap analyst early in my career. However, since Mrs. Humble Student of the Markets is a pilot and has numerous contacts in the aviation industry I thought I would make an exception.
There seems to be a dearth of flight instructors in North America, largely because of the low paying nature of the job. Recently, Mrs. Humble Student of the Markets was involved in a feasibility study to bring students from China to Canada to be trained as pilots. To make a long story short, she found that there was little spare educational capacity at Canadian flight schools, largely because of an instructor shortage. The parallel situation exists in the US (and in any case the US is not suitable for foreign student flight training in the post-9/11 era.)
Why does that matter? It matters because pilots, and airline pilots in particular, need to be trained as older ones retire. This shortage of flight instructors will eventually feed into a shortage of pilots, which will shift the bargaining power of pilot unions vs. the airlines. In fact, the shortage is starting to be felt in the emerging markets, where there is not a ready supply of experienced pilots. In one instance, an airline based in an emerging market country offered a job to a recently a qualified pilot (commercial multi-engine IFR rating) as a First Officer (co-pilot) with the understanding that he would be promoted to Captain (pilot) after 500 hours of flight time. This would be the equivalent of allowing a fresh intern, one or two years out of medical school, to perform brain surgery.
Back in North America, it probably doesn’t make a huge difference in the medium term as the United States heads into recession, which would likely result in layoffs at the airlines and create a surplus of pilots. Longer term, however, the shortage of flight instructors and eventually pilots is like the plankton disappearing from the ocean – it eventually makes itself felt all the way up the food chain.
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Old 04-02-2008, 07:44 AM   #2  
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Good article I do think we are going into a shortage of pilots in the industry, it will be interesting to see what happens.
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Old 04-02-2008, 07:52 AM   #3  
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So there is a pilot shortage? Most regionals have even postponed interviews right now. And I am truly not trying to peck a fight here, but why are you still flying a turboprop if the airlines are having such a rough time finding people to fly their jets? I and plenty others worked the personal contacts and job fairs for YEARS before getting the opportunity of being hired at what we hope is our last job (barring catastrophe or furlough.) I don't think you will ever see United hiring off the street like they did for a short period in the 60's. When the job market looks like a great career can be had, people will train themselves for the job.

Cheers!
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Old 04-02-2008, 08:05 AM   #4  
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I don't think there is a shortage of pilots. I think there is a shortage of qualified and experienced pilots willing to work for the current wages and working conditions found at most places.
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Old 04-02-2008, 08:31 AM   #5  
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Quote:
Originally Posted by Lab Rat View Post
I don't think there is a shortage of pilots. I think there is a shortage of qualified and experienced pilots willing to work for the current wages and working conditions found at most places.
Absolutely true.

This topic is brought up often but this time it may be legitimate and require a long view.

Longer term, however, the shortage of flight instructors and eventually pilots is like the plankton disappearing from the ocean – it eventually makes itself felt all the way up the food chain.
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Old 04-02-2008, 08:32 AM   #6  
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Quote:
Originally Posted by Opus View Post
Warning to Airlines: Flight Instructor Shortage Could Create Long-Term Problems

posted on: April 02, 2008 | about stocks: DAL / LUV / NWA / UAUA

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I don’t normally comment on fundamental analysis here, despite having been a small cap analyst early in my career. However, since Mrs. Humble Student of the Markets is a pilot and has numerous contacts in the aviation industry I thought I would make an exception.
There seems to be a dearth of flight instructors in North America, largely because of the low paying nature of the job. Recently, Mrs. Humble Student of the Markets was involved in a feasibility study to bring students from China to Canada to be trained as pilots. To make a long story short, she found that there was little spare educational capacity at Canadian flight schools, largely because of an instructor shortage. The parallel situation exists in the US (and in any case the US is not suitable for foreign student flight training in the post-9/11 era.)
Why does that matter? It matters because pilots, and airline pilots in particular, need to be trained as older ones retire. This shortage of flight instructors will eventually feed into a shortage of pilots, which will shift the bargaining power of pilot unions vs. the airlines. In fact, the shortage is starting to be felt in the emerging markets, where there is not a ready supply of experienced pilots. In one instance, an airline based in an emerging market country offered a job to a recently a qualified pilot (commercial multi-engine IFR rating) as a First Officer (co-pilot) with the understanding that he would be promoted to Captain (pilot) after 500 hours of flight time. This would be the equivalent of allowing a fresh intern, one or two years out of medical school, to perform brain surgery.
Back in North America, it probably doesn’t make a huge difference in the medium term as the United States heads into recession, which would likely result in layoffs at the airlines and create a surplus of pilots. Longer term, however, the shortage of flight instructors and eventually pilots is like the plankton disappearing from the ocean – it eventually makes itself felt all the way up the food chain.
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Your analysis is quite accurate. Pilot training in North America is not well organized as an industry and has not produced the capacity necessary to meet the demand. This is in part due to the fact that flight instruction is primarily administered by the very same pilots that make up the entry-level of the commercial airlines. In the U.S., flight instruction is given primarily by the least experienced and least qualified from among the available pilots, and those same inexperienced pilots have been in demand by airline companies seeking to employ the inexperienced pilots at the lowest possible cost.


While the possibility of an economic recession in the U.S., coupled with recent air carrier failures and those soon to come may provide a short-term adjustment in supply, the long term solution to any pilot shortage will require a fundamental change to the way in which pilots are recruited, trained and paid.
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Old 04-02-2008, 08:44 AM   #7  
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but who will make those changes. It needs to be us and the unions. Kind of like the AMA for Doctors. If we can do that then we have a fighting chance.
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Old 04-02-2008, 08:44 AM   #8  
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It all depends on where you look!!!! Asiana is looking for qualified Cap on the A320 747 777, since I can remember.....and they even hired you if you are not current and you last fight has been within 3 years. Kingfisher in India is having the same problem, Jet Airways, Indigo has 100 Airbuses on hold because of the above, no pilots.....look the requirements they have for the upgrade in their web site....is ridiculous!!!!!!!!!! Air Astana the same.

Not to mention CHINA!!! Cathay, Singapore....etc.....

In Europe, Africa and Central America (Ryan Air, Rojal Jordania, Air Blue, TACA, COPA, LANCHILE in Brazil and Mexico) is all the same I can go on and on and on!!!!!

Also every 6 months airlines increases wages to attract mores pilots... Shortage may not be in the US.......for now!!!! But I am sure we are heading in that direction!!!!
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Old 04-02-2008, 08:54 AM   #9  
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If the piloting job (hard to call it a "profession" anymore) was adequately compensated, the supply would be adequate. Spending $100k in training and education to get a job paying trailer park compensation is ludicrous. One could only hope that the entire system comes to a grindingly slow meltdown in the next few years. That's what airline investors, the airline executives, and traveling public deserves. This industry requires a long term outlook and not the ultra short term strategy that the government and CEOs adore.
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Old 04-02-2008, 09:02 AM   #10  
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There's been an impending pilot shortage since the 70s. Let me know when it arrives; pilot wages might actually keep up with inflation.
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