Pilot Shortage Is an Airline Fairy Tale

(Originally published here.)

Airlines sell a commodity and buy from monopolies, i.e., the airports that provide landing rights. So it isn’t surprising they have such a tough time making money. Now they have another problem: There aren’t enough pilots and co-pilots willing to work for the low pay offered by regional carriers.

Airlines call this a “shortage” and blame a recent rule from the Federal Aviation Administration that mandates co-pilots have at least 1,500 hours of flying experience, up from 250. At the margin, the rule does reduce the number of people qualified to serve as a first officer on a plane, but that doesn’t mean there is a shortage.

According to the Airline Pilots Association, there are thousands of U.S. pilots who are either furloughed or unemployed, while thousands more have switched to foreign carriers that offer higher pay. According to the FAA, both the number ofactive certificates for airline pilots and the number of U.S. airline passengershave been little changed during the past five years — not exactly what you would expect if there were a real shortage of workers. The situation is similar to the “shortage” of farm workers that vanished as soon as pay went up.

Like auto manufacturers, U.S. airlines operate in a two-tier labor market where some people get paid quite well and many others are paid much less. The relatively lucrative long-haul flights are run by the major airlines. Local flights are outsourced to regional operators, which try to keep costs low by paying workers as little as possible. According to the Wall Street Journal, a co-pilot at a regional carrier with five years of experience gets paid about $35,100 in base salary, while a co-pilot at a major carrier with the same experience gets $101,900 in base salary.

Although many commercial airline pilots get their experience and training in the military, those who don’t have to pay as much as $100,000 to get the required education and flying time — an investment that can’t be justified when the wages for new workers are so low. This helps explain why the average age of active airline transport pilots has increased to 49.9 in 2012 from 47 in 2003. Ticket prices have increased, but mostly in response to the rising cost of fuel. If airlines want to replace their aging corps of experienced pilots and continue serving second- and third-tier cities, they are going to need to boost pay and raise ticket prices. Alternatively, they should ditch unprofitable routes. At least that strategy doesn’t require making up stories about pilot shortages.

(Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter at @M_C_Klein.)

To contact the writer of this article: Matthew C. Klein at mklein62@bloomberg.net.

To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net.


About Matthew C. Klein

I write about the economy and financial markets for Bloomberg View. Before that I wrote for The Economist on a fellowship provided by the Marjorie Deane Financial Journalism Foundation. I have worked at the world's largest hedge fund and read every FOMC transcript since May, 1987.
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