Spike in oil prices and employment
 

I'm really concerned that the dramatic rise in oil will effect job prospects in the airline industry. According to news reports American Airlines has and will be laying off thousands of employees due to the spike in oil costs. I afraid other air carriers will soon follow.:(

There is no doubt that high oil prices affect the airline industry as well as other aspects of transportation. However, I believe high oil prices to be but a symptom of a much bigger problem - and that problem is the inability of most carriers to pass on higher costs of doing business to the consumer.

Please don't misunderstand me because I am in no way trying to minimize the enormity of the relationship of high fuel prices to profits. I just believe the bigger problem lies in the fact that the airline industry has great difficulty in passing along costs to the consumer. i.e., it has been selling and continues to sell a product for less money then it takes to produce. Until that problem is solved I don't think we will see much in the way of financial stability in the industry regardless of fuel prices.

Welcome to professional aviation...

With a little luck, this oil spike is speculative, and the bubble will pop (like real estate and tech stocks did). If not, it will permamently downsize the industry by pricing Joe Sixpack and Tina Trailerpark out of leasure flying.

The airline industry's size is determined by two factors:

1) The percentage of the population which want, need , and can afford to fly.

2) The actual size of the US population (and certain overseas populations).


#1 changes with the economy and other factors (terror threats, etc). There are "routine" economic cycles which cause ups and downs in the airline bussiness. However...If oil does not come down, then #1 will likely stay permanently depressed.

#2 Increases over time at least in the US. If you wait long enough, a rising population will grow the airline industry.


I assume you're a student pilot or college student? Any career pilot is going to experience economic cycles during his career. How it affects you depends on where you are when the music stops...

A college freshman will probably be fine...the cycle should be on the upswing by the time he graduates.

A student pilot might have to work as a CFI for 3-4 years, instead of 3-4 months or he might have to fly 135 freight instead of going to a regional.

A junior airline pilot might get furloughed, or he might spend 5 years as a regional FO.

A regional CA might get stuck as a lifer if he gets too old and senior to start over at a major.

One or more of these things will likely happen to you...it is simply the nature of aviation. You can do a couple of things to mitigate the effects....

- Pay attention to global politics and economics so that you might have the slightest clue about the risk of changing jobs at certain times. It might be better to be a senior regional CA than a furloughed major FO.

- Always be prepared...don't load up on debt for flight training (college OK), keep some cash in the bank, and maintain a non-flying skill, job, or business.

- When things appear really gloomy...Look Ahead! It's always been cyclical before, so it will probably come back up. Try to anticipate when this will happen and where the opportunities will be...and set yourself up to take advantage of them!

Also, remember that the regionals are only one option. Corporate, Fracs, 135 charter, 121 supplement freight, and overseas contracts, are all options that may present themselves.

Thanks Rickair! A very detailed answer. Exactly the answer I was looking for.

It seems continuing working while getting my ratings and possibly while flight instructing is the way to go.