Does the recent buyouts (layoffs) of 200 pilots by UPS mark the beginning of the end of the pilot shortage? Not so fast…
Why this is important: The aviation industry has been experiencing a pilot shortage since the FAA introduced its 1500 Rule back in 2013 for first officers of airlines. While the 1500 Rule might have kick-started the pilot shortage, we believe that other factors are prolonging the pilot shortage. We discuss these in detail in our articles The Pilot Shortage – A Challenge for Airlines, Possible Boom for Flight Schools., The Pilot Shortage – Getting “Help” From The FAA…, and The Pilot Shortage – The Real “Culprits”…. With all that being said, the recent move by UPS – which could also happen at FedEx – does not mark the beginning of the end of the pilot shortage in our view. However, it does mark a sea-change – at least for the short-term – in the pilot hiring and jobs market. Some things to consider moving forward:
As the recession deepens and consumer spending declines, cargo carriers will find their revenues dwindle due to a reduction in consumer goods shipping requests.
Moves by cargo carriers while on the micro level may have some effect from company to company, but will not affect the overall pilot market.
Passenger carriers will continue to snap up pilots who are being laid off from cargo carriers, and in some cases, entice those who have not been laid off to leave and join passenger carriers.
Get Involved: Will there be a time when the demand for pilots slump? If so, how will pilots and airlines respond?
The recession and cargo shipping.
It is worth noting that because of weight restrictions, most of the cargo shipped by companies such as FedEx and UPS are consumer goods. This is because they’re lightweight enough and of the right size that they can easily be shipped via air cargo. Larger and heavier cargo are best done with ships, trains, or trucks.
There is no doubt that we are already in a recession within the US economy. If we wanna be technical about it, we could say that we are already in a private sector recession, discussed in detail in our article Private Sector Recession: Should Aviation be Concerned?. Due to the current recession, we can expect that consumers who are paying increasingly more for the goods and services that they need will only be able to buy a lesser amount of those goods and services. This means that the requirement for shipping will reduce over the ensuing years.
While many of us are unable to see the current economic challenges, the managers at FedEx and UPS are well aware of what’s happening, and they are preparing. What they are doing now is to reduce their largest expenditures which include pilots. Other large expenditures include other personnel and fuel.
Not many changes regarding the pilot shortage.
While on the micro level, we will see pilots moving from one carrier to another, from one segment to another, etc. However, we are not expecting to see a major shake-up in the demand for pilots. This is because the underlying factors that are driving the pilot shortage are still there. See the article above.
Even with the economic challenges and a decline in shipping and air travel that will occur in the future, the underlying factors that are prolonging the pilot shortage will be greater than the effects of the recession.
On Aviation™ Note: One caveat to the above, is that if the economy enters into an inflationary depression – as many economists are predicting – this event will significantly overpower the factors that are keeping the pilot shortage going. Therefore, at least for some time, the pilot shortage will be nonexistent – that is if there is no significant government intervention to prevent it.
Passenger carriers and they’re heavy recruiting efforts.
In this newsletter, we have predicted during the pandemic, that the early retirement and furlough activities done by passenger carriers during the pandemic will eventually exacerbate the pilot shortage. Leading these carriers to have an even greater demand for pilots once the industry emerges out of lockdown.
We are seeing where passenger carriers are becoming more aggressive with their recruiting efforts offering very large bonuses not only to newly minted first officers but senior pilots and captains. In some cases offering up to $250,000 signing bonuses.
We expect this to continue until there is a more manageable state of affairs regarding recruitment and hiring at passenger carriers. After which bonuses will fall, if not disappear, and things will get back to pre-pandemic levels.
On Aviation™ Note: A lot of what can be observed these days regarding pilot recruitment is somewhat transitory. This is because these efforts inevitably lead to us moving out of that very dynamic. The other reason is that it is cost-prohibitive to maintain such aggressive recruiting stands for an extended period.
While it can be very exciting to see all this movement in the pilot recruitment and hiring segment of the aviation industry, our enthusiasm should be tempered by a full understanding of what’s happening currently in the space. Therefore, what we are seeing now should not be a cause for alarm in terms of an end to the pilot shortage nor whether or not UPS is having tremendous problems internally. The best way to look at this is to see and understand that these are prudent market moves as the business cycle unfolds. Yet, at the same time, we must understand what the future may bring given the internal and external factors that are impacting the aviation industry and the pilot recruitment and hiring segment in particular.
Thank you for reading this week’s On Aviation™ full article. Will there be a time when the demand for pilots slump? If so, how will pilots and airlines respond? Please share your thoughts in the comments below. Remember to check out our On Aviation™ Podcast and continue the conversation on our Twitter and Instagram.
Orlando – On Aviation™