Aviation has always been buffeted by the turbulence of global events, so it’s no surprise that the Novel Coronavirus pandemic has hit airlines particularly hard. Lockdowns and international travel restrictions reduced passenger numbers by as much as 93% and although there are signs that the crisis is beginning to ease, prevailing opinion is that the aftershocks will continue to shake aviation well into the future. So, what should aspiring pilots make of the situation?Suffice to say opinions are mixed and perspectives vary wildly, with many focussing solely on one area of interest. So, over the past 12 weeks I’ve spoken to professionals across the industry to try to gauge how much the skill shortage might be affected by Coronavirus, and the impact this could have on the availability of pilots to the industry, in the long term.
The pilot shortage had started to bite
I’ll leave a full background discussion of the shortage for another time, but it’s important to deal with the elephant in the room; the question of whether or not a pilot shortage even exists. For those who haven’t seen it already, Boeing’s 2019 prediction was that 804,000 new civil pilots would be required globally by 2038. While this report was issued before the Coronavirus pandemic, the underlying figures show that a pilot shortage was developing at that time. And whether or not they believed it, the behaviour of airline execs showed that they were concerned.
Consumer demand grew on average 5% every year between 2007 and 2017. Meanwhile, numbers of pilots rose only by 1% per year. So far, this deficit has been absorbed, partly as a result of an increase in the mandatory retirement age, but in the decade up to 2027, compulsory retirements alone will leave the airlines having to find over 90,000 Captains and 105,000 new pilots, and that is just to maintain numbers at the 2017 level. Factor in forecast growth, and those numbers more than double.
In 2017 the numbers were given context, after hundreds of thousands of Ryanair passengers had flights cancelled due to ‘rostering errors.’ Famously bellicose boss Michael O’Leary barely managed to back-pedal out of a pilot strike; by apologising to a cadre he had previously referred to as ‘glorified taxi drivers’ and recognising their union in a staggering u-turn in company policy. The value of pilots was going up.
More recently, most of the airlines that survived the initial impact of the pandemic have so far resisted large numbers of pilot redundancies. This isn’t necessarily an indication that pilots are suddenly their highest priority, but it does demonstrate a concern that carriers ditching their pilots now may struggle to get them back in time to safeguard the airline’s survival when things improve.
Consumer demand had been outgrowing new pilot production, and airlines were placing greater value on their pilots. This indicates that demand for pilots had started to outstrip supply. Then, the virus arrived.
The airlines will endure
It is fair to say that some airlines have been able to survive, and in some cases avoid redundancies, in no small part due to astronomic government-issued bailout grants and loans.
This indicates that governments around the world see airlines as being instrumental to supporting the globalised economy that the international community depends upon. It is not that airlines are ‘too big to fail’, more that they are too important to the machinery of commerce. The other implication of these bailouts, particularly where states exchanged funds for airline stock, is that these governments expect the airlines to recover and grow again, and that expectation is realistic.
This is not to say that passenger numbers will rebound immediately. Consumer demand due to the pandemic is estimated to have reduced by nearly 55% so far in 2020. This represents a contraction back to 2006 levels, just prior to the Global Financial Crisis.
At the moment passenger numbers are heavily limited by travel restrictions, but where domestic flights have recommenced, there have been passengers flying. This seems to indicate that in the UK at least, passenger demand is being more limited by travel restrictions than health fears.
So, while the inevitable economic impact and health concerns will reduce immediate consumer demand, it seems safe to assume that passengers will be waiting to travel, when an easing in restrictions allows it. However, crunching the numbers shows that it will take an increase of just 20% in consumer demand in 2021 for growth in demand to once again overtake growth in pilot numbers (Fig 1). This sounds like a lot but bear in mind that is only 20% more than has been possible during the Coronavirus pandemic, during which time international air travel has been virtually non-existent.
The airlines don’t just compete with one another
The impact of these regulatory measures is unlikely to recede once the measures themselves have been lifted. International air travel will be a different experience once it is permitted again, with additional health security measures likely to be layered on top of the already onerous procedures that passengers endured before, and airport experiences are likely to become even more unpleasant. This sounds like another downside, but it is actually likely to increase the demand for pilots.
For one group of passengers in particular, these additional hardships might be a crucial push factor away from the airlines. Chad Anderson is the president of Jetcraft, an international aircraft sales company that is currently listing aircraft ranging from Beechcraft King Airs to Boeing Business Jets.
“We are seeing new entrants and new markets entering via fractional ownership and jet cards,” he said in a recent interview.
Bryan Del Monte, president of The Aviation Agency went further in another interview, describing the present situation as likely to yield “the renaissance of business aviation.”
The crisis for the airlines has presented an opportunity for business aviation, an industry that was feeling the pressure from the pilot shortage even before the pandemic. While most associate small jet passenger aircraft with the super-rich 1%, they are called ‘business jets’ for a reason. Although professional corporations shunned them after the Global Financial Crisis, as much to save face as save costs, their utility is once again being recognised. In the same interview, Bryan Del Monte said that he believes businesses are again beginning to see the value of using private aviation, whether that is their own fleet of aircraft or charter operations:
“I think you’re going to see a lot of businesses invest in Part 91 (the U.S. regulation for non-commercial general aviation) fleets, whether its King Airs or medium-size turbine … If you’re spending 200 [to] 500,000 dollars a year on travel, you’re spending enough that there a lot of companies that would be more than happy to put together a jet card for you.”
Looking further into the numbers, AvBuyer’s June Business Aviation Market Overview showed that while overall business jet travel was predictably well down during early 2020, there is no indication of a sudden reaction in the used jet market.
In fact, in an interview with AvBuyer on 15 May, Sparfell Aviation Group CEO, Edward Queffelec explained that international travel restrictions were the principal cause of the reduction in business aviation activity, but he had still seen new customers.
“Business Aviation also offers the natural benefit of providing social distancing by avoiding large airport terminals and large numbers of fellow passengers. This limits contact between travellers and potential virus transmission,” he said in the interview, adding:
“For these reasons we expect new customers to use charter services to protect themselves, their colleagues, their families and loved ones.”
While jobs flying these operations might lack the benefits of airline employment such as regular working schedules, they nevertheless add to the demand side of the equation, making a pilot shortage more likely rather than less.
The impact of the pandemic will reduce pilot availability
While the pandemic has pushed some passengers out of aviation, it will also have the same effect on plenty of pilots, and that will have a dramatic effect on future availability.
It seems that new symptoms of the Novel Coronavirus are being discovered every day, but it is yet to be thought to reverse people’s age. Remember all those compulsory retirements? Well those pilots are still ageing and will retire, pandemic or not. By 2027 over 35% of the pilots that were flying in 2017 will be out to pasture.
To match that decline in pilot numbers, growth in consumer demand will need to remain below 3% every year between the pandemic low and 2027 (Fig 2). I believe this is unlikely. Further analysis of statistics published by Oliver Wyman here and here bear this out. I plotted their updated forecast against pilot demand and depending on how the fleet grows thereafter, we are back into pilot training deficit somewhere between 2023 and 2026.
That is not to say there won’t be a short-term surplus as demand dramatically drops. In fact, a short-term surplus is very probable, but paradoxically this too is likely to increase the severity of the shortage when growth once again outstrips new pilot numbers.
Here things get somewhat more subjective though, as the situation will depend on the length of the downturn, the severity with which the redundancies occur and the scale of any consolidation or recovery. Note that the difference between growth in pilot numbers and growth in demand does not indicate absolute values, but rates of change. Therefore, a deficit doesn’t necessarily indicate a shortage at that time, but rather an overall mismatch of supply against demand; an impending shortage. In simple terms, any time the blue line is above the orange line, the shortage is getting worse. The bigger the distance, the quicker it is happening.
The worst case (Fig 3) would be a lengthy period of stagnation, followed by aggressive growth. This would doubtless involve relatively severe job losses on top of normal age-related redundancies. This would likely lead to many leaving the industry altogether, and would almost certainly impact recruitment, damaging growth potential in the years following the immediate impact. For this reason, a recovery in pilot growth would likely lag demand, and if the growth was strong (I’ve limited it at the maximum values that followed the Global Financial Crisis, which I believe is very conservative) the difference between supply and demand would open rapidly.
Case 2 involves a modest recovery (Fig 4), followed by year on year growth thereafter that reflected the trend prior to the pandemic, with pilot growth sustained throughout at current trends. Note that there is still a deficit, but the rate that it is growing is minimal.
In fact, I think both of these cases might be optimistic due to third order effects that are certainly beyond my capacity to quantify, and in some cases entirely intangible. But they are foreseeable.
Firstly, it is extremely unlikely that 2020 will produce a typical training output, as commercial flying schools all over the world have been limiting their activity. This will decrease inflow at the same time that redundancies are likely to increase outflow of pilots from the market.
If the economic effects of the pandemic are as bad as is being predicted, it is also possible that a financial crisis could also limit access to lending for those wishing to take up training in the years that follow, further reducing training output.
Any pilot redundancies from surviving airlines will adhere to the seniority structure, meaning that junior pilots will make up the bulk of those losing their jobs. The average age of airline pilots globally currently sits between 44 and 48 years, and the older the average workforce, the greater proportion will be lost each year as they time-out on age. This is bad news for the Americas in particular, as that region accounts for 33% of the predicted requirement for new pilots by 2027, while the average pilot age there is in the top of the bracket, at 48. Meanwhile, China is predicted to require around 35% of new pilots in the same timeframe, and has outsourced much of its training burden, largely due to airspace restrictions at home. Almost half of the 5053 Chinese pilots that trained in 2017 did so abroad and will return home. Chinese airlines are paying for their cadets to train, as well as buying up plenty of companies around the world that provide that training. They are also offering extremely generous remuneration packages for experienced foreign pilots. China is clearly awake to the shortage and is taking steps to ensure that it is not only at the front of the dinner queue, but also flipping the burgers and farming the cows. Europe provides much of this training and is the venue for many of the schools being sold, however it accounts for only 20% of forecast demand. Nevertheless, there is a risk that domestic airlines will get pushed aside by their rich and hungry Chinese siblings and will have nowhere to turn for new talent.
The bottom line
So, what would bring about a pilot surplus? In order to negate any shortage, the Novel Coronavirus pandemic would have to have some fairly unique consequences. Firstly, it would have to allow passenger demand to rebound, but at a fraction of historic values. The circumstances surrounding this would have to allow nearly all presently qualified pilots under retirement age to remain employable during the gradual recovery, to avoid their exit from the market. Whatever factors transpired to create this situation, would also need to afflict business aviation, curtailing the growth in that industry and cooling demand considerably to keep pilots from transitioning there from the airlines. Finally, as growth in demand tailed off again after an initial (but slight) rebound, growth in pilot numbers would have to simultaneously increase. Something like this seemingly extremely improbable situation is shown in Fig 5. A rebound of 10% in demand tails off to just 2% year on year, while pilot growth is maintained at 3%. Even then, growth in pilot supply only just edges out inexorable increases in demand for air travel. There is one eventuality that might prevent a shortage, at least in the short term, and that is another extension to the compulsory retirement age. It is plausible that it might be extended to 68 to match some statutory retirement ages (for example in the U.K.) but this would only be a three-year extension and would leave insufficient time to prepare for when the bubble burst. I believe an extension beyond the age of 70 is unlikely, as there are few professions dealing in safety-critical high-reliability industries that employ personnel of this age at the point of delivery.
The winds of change
Much like the Novel Coronavirus itself, any reaction to the pilot shortage after it becomes evident will be too late. It must be predicted and mitigated before it becomes a factor. Unfortunately, any success in doing so will likely yield the response that it never existed in the first place.
But the warning signs are there for all to see. Little by little, day by day, the pilot workforce is eroding as a result of compulsory retirement. Against this tide the numbers being recruited have, for around the last decade, managed only to grow the available talent pool at a rate that has been far outstripped by rising consumer demand.
For the time being, a virus has grounded almost all the world’s airliners, but while it’s true to say that there may be a lot of airline pilots looking for work soon, it’s important to realise that this represents a decrease in demand, not an increase in supply. As soon as the borders are open, the signs are that passenger demand will grow again. It doesn’t have to grow much, even from the current parlous state, to once again overtake supply, which will also have taken a beating from the effects of the pandemic.
Meanwhile, the airlines are playing a waiting game, unwilling to take risk with redundancies and certainly unable to take on new hires while the situation is so uncertain. This is bad news for those that are recently jobless, but it makes little difference to the overall pilot shortage.
For those lower down in airline food-chains, job security is a major concern at the moment and rightly so, but the situation for those just considering beginning their professional pilot training is slightly different.
The bottom line is that the pandemic has reduced customer demand in the most noticeable areas and moved it around in others. Flying is likely to be different afterwards; for most this will involve even more airport tedium, for others it is likely to mean their own aircraft – a luxury they may well get used to, especially if it is more acceptable to maintain distance than join the crowd at check-in. The effects of the Novel Coronavirus on the airline industry are perhaps even more of a mystery than its impact on health. Uncertainty rules, and this is far from a rallying cry for those with flying ambitions to rush into a career in aviation. But we must make sure that in dealing with the drought of today, we don’t leave ourselves vulnerable to the gathering rainclouds on the horizon.