The Pilot Training Opportunity is Dramatic, Right Now

And here we are in 2023.

After the pandemic, many of the thousands of pilots who had been grounded did not return to flight decks. Two factors – both triggered by Covid - combined to create a huge airline pilot shortage:

1. A scheduled surge of retirements, most obvious in the US.
2. Closure (without students or any government support) for many primary (ab initio) training schools delivering professional licences.

Government support kept many airlines afloat, but no primary training organisations. Within the 193 ICAO Contracting States around the world, approximately 2,000 Approved Training Organisations (ATOs) operated globally prior to 2020. As many as 20-30% of these may now have closed without revenues from students during the pandemic.

The immediate supply challenges for large airlines, especially in the US, are being addressed tactically by offering very high salaries, including to foreign pilots1; kicking the demand bucket back down to initial training for those airlines losing pilots. The secondary effect of this is to increase pilot mobility across the world, placing even more pressure on training systems already damaged by the pandemic.

Early Warnings

From the start of the Covid pandemic in early 2020, significant projections were published in the Journal of Civil Aviation Training (CAT)2, outlining the impact on the primary pilot training industry3 based on simple calculations and probabilities. Common-sense reasoning pointed to a unique opportunity to utilise the pandemic downtime to increase the volume and quality of professional pilots in preparation for the inevitable surge of demand, post-pandemic.

But during the pandemic, no investors could be found who recognised the imminent pilot training shortfall as a unique aviation funding opportunity, instead preferring to cling to historical risk-aversion models. As primary customers, most airlines had to “live for the day” during the pandemic, putting financial survival on the front burner. While the coming primary pilot training crisis may have been recognised, the belief that the market would always ‘self-correct’ may have prevailed over proactive action – except for a few carriers that started their own ATOs.

Traditional Pilot Supply

As a reminder of how airline pilot sourcing works: traditional sources include General Aviation and the Air Forces; but these two sources supply only a small proportion of airline needs. To accommodate retirements and the projected doubling of the airline fleet every 15-20 years4, the lion’s share of demand must be met from the start of the pipeline – primary (ab initio) training, a service often outsourced by airlines. The airline industry and aircraft manufacturers have concentrated their attention effectively on the delivery of improved airline programs such as type and recurrent training, putting primary pilot training on the backburner – on the assumption that the market would supply. This omission may now have serious consequences.

Restoring Primary Training Supply

Post pandemic, the primary training industry has shrunk, and most surviving ATOs  seeking organic growth are facing two barriers:

1. A severe lack of instructors, many having left for more lucrative airline jobs5.
2. A severe lack of training aircraft with up to 4 years lead time to secure new aircraft.

Investment is required to rebuild capacity and standards. Even if training aircraft can be found, the lead times of 18-30 months to graduate new Commercial Pilots from existing ATOs cannot even occur until enough instructors are trained. Simple calculations suggest that the primary training industry will be unable to meet the rapidly rising training demand for years to come.

Quality and Relevance

Well before the pandemic, oversight organisations in the aviation industry6 had recognised the variability in output standards of primary training suppliers around the world. Due to the sheer volume of ATOs within the ICAO States, efforts to raise and level these standards failed. Pandemic impacts greatly worsened the situation, moving the focus of many ATOs to business survival, rather than the quality and relevance of training. Mass departures of experienced instructors, financial stress, ATO closures, and the need to maximise student churn at minimum regulatory standards have combined to drive standards unwittingly downward at this critical time, with the potential to unintentionally insert latent pathogens into future operations which can strike many years later in piloting careers.

Supercritical to Safety

Training quality and relevance are both supercritical to future safety at this fragile time. Post-pandemic evidence is emerging of continuously declining experience levels on flight decks as retirements surge, promotion accelerates, and supply shrinks. CAE projects that by 2032, 50% of airline pilots will have less than 10 years of experience.

Low experience levels can be balanced if training is of high quality and relevance, as demonstrated for many decades in Europe, where 250-hour pilot CPL graduates joined airlines directly without measurable negative safety outcomes. But today, precisely the opposite is unfolding, further exacerbated by the acceleration of First Officer upgrades to Command, weakening the experience-based mentoring required from Captains for low-experience First Officers, hitherto a strong feature of the EASA system.

Tired legacy mindsets put improved training standards into the ‘nice to have’ not ‘need to have’ with two inevitable outcomes:

1. Safety margins will decrease.
2. Airliners will be grounded without pilots to fly them.

The Investment Opportunity

While the situation described may have grave outcomes for future industry safety, investors need good financial returns, and primary flight schools have not been attractive traditionally. However, we are living in a sweet spot of demand not previously seen, and there is a big gap to fill in primary training output in terms of both volume and quality.

The latest primary training requirements published by ICAO (Document 9868), if adopted carefully, increase the efficiency and relevance requirements for primary pilot training, and new training technologies are increasing training effectiveness and reducing time and cost. This enables business cases for new ATOs to offer returns superior to legacy models, and a higher standard of graduates at reduced cost, in a uniquely high-demand market.

Greenfield ATOs geared to the highest standards and lowest costs, launched now, could be training by January 2025, to produce 200 high-quality graduates per year from 2026. The capital required for each is likely to be equivalent to a widebody jet engine7.

Once all other sourcing options are gone, the demand of approximately 30,000 new pilots every year must come from primary training. The opportunity is hugely scalable; ATOs with new-generation processes can replicate around the world. But without the investment, an increasingly large number of airliners will be grounded, causing contraction of services with no short-term fixes.

The Missing Piece: Funding

Primary pilot training demand has never been so strong, and the data suggests that this will remain so for many years. Both the volume and quality of pilot training require urgent concerted action, and commensurate enabling investment.

The Project X team plans to deliver primary pilot training in a more consistent, relevant, and efficient way, throughout the training industry.

Project X8 – an outgrowth of the New Horizon Flight Academy concept developed during the pandemic - proposes the combination of a special breed of motivated instructors and available new training technologies applied to competency-based multi-crew training to deliver more competent pilots in less time and cost while also protecting future safety margins wherever these new programs are used.

Investor commitment to launch a new generation of primary ATOs is all that is needed to establish and demonstrate these improvements to State Regulators and encourage ICAO to drive broad change in the ab initio training industry. But this will need energetic participation from State Regulators to achieve the most rapid and vital changes required.

An estimated US$10-20 million investment commitment should enable the launch of new-gen professional pilot (ab initio) training units in optimal locations. This is a relatively small investment in relation to the potential longer-term safety dividend. And as a shorter-smarter programme, more rewarding returns should come to investors in this space on the order of 20% IRR or more. The scale of this opportunity is large.

Project X is led by experienced professional pilots with a combined 125 years in aviation, 60,000 flight hours in two air forces and 11 airlines – all with simulation, training, examining, and airline management experience. The Project X team is committed to use their experience to help regulators mandate more relevant training to deliver more competent pilots in less time and cost, on an initial platform of existing regulation, helping the industry to emerge safely from the pandemic amidst a plethora of threats.

To the investment community, consider becoming an investor in this significant aviation opportunity in a growth market with strong returns servicing an international customer base requiring approximately 30,000 new commercial pilots per year.

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1 Just one airline in Australia has lost 60 out of 220 pilots recently to high-paying US carriers, and from a pool of approximately 9,000 licence holders in the country, 1,000 US E3 visas have been issued in the last 18 months.

2 Opportunity in Crisis: The Flight Academy of the Future; 22 Challenges to Airline Pilot Supply...and a Call to Urgent Action; Are We Sleepwalking?

3 Consisting of Flight Schools referred to as ATOs (Approved Training Organisations) or FTOs (Flight Training Organisations), both meaning approved schools which train to regulatory requirements. ATO is the term used in this analysis to cover all.

4 Most respected analysts project a need for over 600,000 airline pilots over the next 2 decades (including retirements) equivalent to 30,000 professional pilots needed every year.

5 A substantial proportion of experienced flight instructors have left training to join the airlines.

6 ICAO, IATA, and FAA were 3 of the 5 parties who encouraged the formation of the International Pilot Training Consortium (IPTC) which operated between 2012 and 2015 with limited success due to the enormity of the task. It would now seem that change needs to come, as usual, through demonstration by industry.

7 A drop in the ocean compared to the financial disruption generated by airliner groundings.

8 Project ‘X’ | Halldale Group