With multiple COVID-19 vaccines on the horizon and the air transportation industry poised for recovery, attention will soon turn once again to the enduring pilot shortage.
No government aid program or temporary furlough has stopped the flow of time, and with it, the growing tide of airline pilot retirements. With almost half of the Air Transport Pilot population facing mandatory retirement age within the next decade, thousands of airline captains and first officers will depart the airline industry each year for years to come.
Two notable U.S. regional carriers, Compass and Trans States Airlines, provide a cautionary tale. Both failed recently, beset by shortages in their workforces of Captains and First Officers, with Covid-19 striking a final blow in the early spring of 2020.
Pilot staffing remains an Achilles heel for the entire industry.
Nothing will fill the widening gap between enrollments and recovering airline demand except for a new generation of motivated students.
As air travel grew during the boom years prior to COVID-19, enrollments for new student pilots did not keep up with demand. In the years since 2010, airlines have flown 30% more passengers and miles overall, but student pilot enrollments have declined by 5%. The shortage is so acute that the COVID-19 crisis will only reduce long-term demand for pilots by 10% in the North American market. Demand for new pilots has not disappeared during COVID-19, only paused.
The aviation training industry is ill-prepared to keep pace with a returning surge in demand for new pilots. Overall student dropout rates have been as high as 80% in recent Flight Training Experience surveys conducted by the Aircraft Owners and Pilots Association (AOPA). Yet the number, sophistication, and quality of training programs has increased by leaps and bounds in recent years.
What is holding back new pilots?
Clues emerge when one examines the economics of flight training. AOPA’s survey revealed that 78% of surveyed students express concerns about the financial risks of expensive training loans.
New students incur a minimum of $70,000 in training costs up front, with entry-level pay at small commuter airlines as low as $25,000 per year. The financial pressures on new pilots are immense.
More challenges loom for airlines hoping to recruit a diverse and inclusive pilot workforce.
The social upheavals of 2020 inspired the Organization of Black Aerospace Professionals and many major airlines to focus on forging a new “aerospace industry as diverse as the people we serve.” In the U.S. Air Transport Pilot community, there is much to be done to close the diversity gap.
Caucasian males comprise over 98% of the U.S. ATP workforce, and the economic challenges of flight training are pushing the needles in the wrong direction.
Flight training is unaffordable for all but a very few prospective students. Minority and low-income pilots have been hit particularly hard, because they lack access to the co-signers and good credit ratings required by most private loan programs.
The student loan industry fails to adequately serve student pilots.
This is because most student pilots in the U.S. do not seek collegiate degrees, and so are ineligible for Federally funded student loans. Alternative funding sources, like the private loan market for flight training, have collapsed in 2020, with loan approval rates for new students hovering at less than 10%.
Flight school remains a wise choice for aspiring pilots, as the demographics of the aging ATP population driving a hiring boom that will last for decades. While entry-level salaries are low, most career paths see pay doubling in the first five years of service.
It makes good sense for students to invest in their future by financing their training. But “business as usual” in the aviation industry threatens to exclude an entire generation of minorities and low-income students from the vibrant economic opportunities aviation has to offer. More loans and other types of financing are required in order to support tomorrow’s first officers and captains.
Every skilled and dedicated student pilot will be needed, regardless of their access to co-signers, credit, or collateral. Fortunately, change is on the horizon, offering new ways for student pilots to finance their airline careers.
Making flight schools more affordable to minorities
Income Share Agreements (ISAs) have emerged as a promising alternative to student loans for many students.
Income Share Agreements are an education financing model widely adopted by universities and vocational schools outside of aviation. With an income share agreement, the student agrees to repay a fraction of their pre-tax income over a set contract period.
The student is only obligated to pay if their income is above a certain level. And once the student’s aggregate payments over the life of the ISA have reached a fixed payment cap, they are released from the contract.
“The new normal” after Covid-19 will see many changes as the airline industry returns to record-setting growth in a disrupted labor market where the supply of new pilots will be more uncertain than before. Financial barriers to entry will exclude an entire generation of pilots unless the training industry adapts to make flight schools more affordable to minorities.
Income Share Agreements offer a promising way forward, but flight schools will need to change their mindset and provide more than just training. To the next generation of students, a logbook and ratings are just the beginning. They are looking for, and deserve, a satisfying career with financial stability.
Flight schools with quality cadet programs, good job placement, and excellent alumni relations will likely prosper under an ISA model. This is because student and school interests are aligned under an ISA contract: If the pilot doesn’t succeed, the school and its financial provider won’t get paid.
Flight schools that can deliver a total career package to hard-working students will have a competitive advantage.
Paul Wynns, co-founder and CEO of Flex Air
Paul Wynns is a retired naval aviator and former military flight instructor. He has led teams and organizations in cultures and environments ranging from military to startup to the world’s largest aerospace company. His experience in aerospace includes combat flight operations, aviation maintenance programs, and new product prototyping. He is currently enrolled as a Ph.D. student at the University of California, San Diego Rady School of Management, where he is researching social impact investing solutions to solve workforce diversity challenges in aviation. Paul is co-founder and CEO of Flex Air, a flight school for the next generation of commercial pilots.