Pay to Fly

Robert W. Moorman explores the challenges prospective professional pilots face in paying for the ever-increasing cost of flight training.

With Covid-19 vaccinations well underway and the surprising uptick of US domestic airline traffic, carriers must now accelerate plans to select and train pilots to meet projected demand for air service over the next 10-20 years.

Filling that need, in the midst of the expected re-emerging pilot shortage, will be challenging. So too will be finding financial mechanisms to help pilots pay for flight training.

The cost of becoming an airline pilot, from obtaining an initial pilot’s license to getting an Airline Transport Pilots License (ATPL), is expensive. And the cost is likely to climb. Florida-based Epic Flight Academy’s South Korean Pilot Program costs $51,925.000 presently, up from $46,159.30, according to the school’s website.

UK-based L3Harris Airline Academy, one of the leading independent flight schools, charges $83,995 to obtain a professional pilot’s license, not counting accommodation, books and supplies and other fees.

A CAE spokesperson told CAT, “Depending on location, ATPL costs roughly around €90K-100K. Airlines’ ATPL programs include type rating and are costing slightly higher.”

Cash Trickle

“To put it bluntly, there is no immediate, direct financial assistance for training pilots,” said James Dinsdale, a former easyJet Airbus A320 pilot, who became redundant due to Covid-19. “From the government perspective, it is not classed the same as university tuition, which has government grants and loans to help university students.”

Dinsdale paid £87,000 for his ATPL type rating plus an additional £30,000 after being offered a job with easyJet (about US$163,000 total at current rates).

It all comes down to money and who is able to pay for the training. “Money has always been one of the major obstacles for civil flight training,” said Capt. Gary Morrison, Immediate Past Chairman of the Aviation Accreditation Board International (AABI). “To this day, many potentially capable applicants are unable to pursue flight training to the level required for civil professional pilots.”

Morrison added: “There has never been enough funding to meet the cyclical demand for commercial pilots.”

Airline pathway programs – from regionals to majors – plus signing bonuses, guaranteed interviews for employment, even assistance with loans have helped. “And yet, the problem remains; training becomes more expensive and fewer applicants can afford the high cost of training,” said Morrison.

Some suggest it’s time for governments to help resolve the situation.

The US-based Regional Airlines Association (RAA) is sponsoring a forward-looking, needs-based financial aid bill, The Flight Education Access Act. If passed, the bill would expand access to Title IV funds of the Higher Education Act to cover the cost of flight training at two and four-year universities.

The bill, which has yet to be formally introduced in Congress, has three principal goals: to ensure a healthy supply of proficient pilots, assist candidates to cover the cost of flight training, and diversify the cockpit.

“Today, the high cost of flight training and education is the number one barrier to entering the pilot profession, preventing all but those fortunate enough to have the wealth or access to private capital to afford their education and training,” said RAA President and CEO Faye Malarkey Black. “This proposal would make the pilot education and training pathway more equitable and inclusive by making more federal loan aid available to help cover flight training costs for ordinary Americans whose families may not be able to foot the large bill for pilot education.”

In its overview of the Access Act, RAA asserts that “student loan debt-to-income ratio for pilots has crippled the pipeline of pilots,” with costs similar to other professions. Current law and medical school graduates begin their careers with a student debt of $160,000 and $215,000, respectively. ATP-rated pilots are not far behind in debt load, according to pilots and students.

Elsewhere, there is movement to help pilots defray the cost of training.

While not a big help in reducing training costs, the UK government is considering a proposal to drop the value-added tax (VAT) for vocational training, under which pilot training could be classified.

The Australian government, through its ‘JobKeeper’ wage subsidy program, proposes funding both routine and advanced training for about 5,000 furloughed pilots, cabin crew, engineers and other workers of Qantas airlines. The program was due to expire as this article was being compiled. Whether the Aussie government continues ‘JobKeeper’ throughout the duration of the virus, or becomes a permanent fixture, remains unknown.

Singapore Airlines declined to comment on financial matters outside of reported financial results, but did point CAT to a late 2020 news story in the Straits Times stating that $20 million of a multi-million Covid-19 relief package could be used to retrain Singapore Airlines pilots to keep their skills current.

The Danish government is underwriting recurrent training for airline pilots, who were furloughed during the pandemic. As part of the agreement with airlines, the affected pilots can receive their Line Proficiency Check (LPC) with any Approved Training Organization, but prefer the airlines’ ATO. The cost will be covered up to a maximum amount of $2,500 (15.000 d.kr). The airline invoices the government directly.

Sunclass Airlines, formerly known as Thomas Cook Airlines Scandinavia, in an agreement with the pilot union and the Danish government, provides funding for an LPC. “The aim is to relieve the airline from both a training and cost burden, when the pilot returns to work,” said Nicolai Bondo Rasmussen, Training Manager, Sunclass.

Another aid package is in the works to pay for the Operator Proficiency Check (OPC) and Operators Conversion Course, said Rasmussen. The overall goal is to maintain the safety standard while still providing the needed training.

OEMs have shown some interest in helping pilots reduce the cost of flight training. The Airbus Flight Academy Europe has developed partnerships with local banks to help applicants obtain student loans. The interest rate of those loans is unknown.

Boeing Training and Professional Services has a range of activities related to pilot training. On whether Boeing provides financial assistance for prospective airline pilots, a company spokesperson stated: “We’ll defer to the carriers to share any further perspective on industry needs or their needs.”

Image credit: L3Harris.

Debt and the Next Pilot Shortage

In recent years, CAT has queried a number of prospective US-based airline pilots, who have accumulated a sizable debt of between $50,000-$75,000. Some pilots-in-making were still working on obtaining their ATPL, the highest license FAA issues.

To be considered for hire by airlines, a pilot must be 23 years old, speak English fluently, hold a commercial pilot certificate with an instrument rating and have at least 1,500 hours of total flight time. Fifty of those hours must be in multi-engine aircraft. It takes two-years approximately to become an airline-rated pilot.

The airlines find themselves in a perplexing situation presently. Business is improving, but could be stymied unless pilot ranks are replenished to maintain long-term growth. Expedited pilot retirements during the height of the pandemic have not helped matters. Nor have those student pilots that might have exited the workforce to work in another field.

Several airline analysts to whom CAT spoke reported increased load factors at several airlines, including Delta Air Lines, Southwest Airlines and American Airlines. Traffic between North America and Europe is likely to pick up this summer following an announcement by the European Union to lift travel restrictions for vaccinated American tourists.

Oliver Wyman’s transportation unit, citing data from the OAG and the International Air Transport Association (IATA), predicted a “renewed call” for 34,000 additional commercial airline pilots worldwide, in a recent report. And that figure could go up.

The report contends that a global pilot shortage would emerge in certain regions around 2023. “However, with a more rapid recovery and greater supply shocks, this could be felt as early as late this year [2021],” the report stated.

Furloughed airline pilots and those pilots undergoing aircraft type training will provide carriers some relief, but not enough to meet projected traffic demand over the next several years.

How to attract candidates and pay for their training remains an ongoing concern.

In Western Europe, Income Shared Agreements (ISAs) between larger airlines and financial institutions could help underwrite the cost of training pilots. Airlines would pick up the tab in exchange for a portion of the pilot’s income once they’re hired. Those kinds of arrangements are moving slowly in Europe and don’t yet exist with US carriers. But that could change if the pilot shortage becomes critical at US airlines.

“In the US, the financing for pilot training comes mainly from families and financial institutions,” said transportation analyst Geoff Murray, who with colleague Taylor Cornwall produced the Oliver Wyman pilot shortage report. “I would not be surprised to see unique training programs put into place, such as with private equity, venture capital and financial institutions collaborating with airlines” to provide financial assistance for pilot training, said Murray.

The need for new pilots will increase, although financing for training remains a major concern. Said Cornwall: “Pilot demand is going to be based on recovery. The biggest risk and biggest lever is in supply.”

The foundation for helping prospective airline pilots pay for training was never fully developed during the pandemic. That has to change now that airline traffic is picking up. The rate of air traffic growth during the market recovery also will determine when and if the pilot shortage becomes a barrier to growth.

Airlines face a good news, bad news situation. The recovery is coming faster than anticipated thanks to a “huge, pent-up demand,” said United Airlines CEO Scott Kirby during an earnings call. The potential bad news is that airlines might not have enough pilots to fulfill growth projections.

United Airlines Aviate Academy, and other major carriers, are meeting the challenge by reenergizing their in-house ab initio pilot academies and bolstering relationships with independent training houses. United states on the Aviation Academy website that it plans to hire more than 10,000 pilots over the next decade.

Yet, few airlines are offering direct cash payments to prospective airline pilots, many of whom have already rung up a significant bill in paying for various stages required to become an airline pilot.

Adding to the challenge is the ever-present 1,500-hour rule passed in 2013 that requires pilots to have accumulated 1,500 flight hours (or 1,000 flight hours via an accredited aviation-related university) before they can be hired as an airline First Officer at a regional airline, typically.

Debating the reasoning behind the 1,500-hour threshold is moot at this point. It’s the law. But the requirements prompted a number of pilot-track students at universities to rethink their calling initially. Some prospective pilots sought other careers while others added additional skills to their resume, such as obtaining a business degree. Academics at leading aviation-related universities don’t believe that the 1,500-hour rule prompted an exodus of pilots. Embry-Riddle Aeronautical University (ERAU), for example, has not seen a drop in enrollment since the 1,500-hour rule became effective.

ERAU is trying to expand its philanthropic efforts “to help us offer more scholarships,” said Jason M. Ruckert, Vice President of Enrollment Management.

Kenneth P. Byrnes, PhD, Chairman of ERAU’s Flight Training Department, was asked if airlines would soon offer to pay all or a sizable portion of flight training to attract pilot candidates. “I believe it is a possibility in the future, especially when this pilot shortage kicks back in.”

The increasing need for airline pilots is a good sign for carriers, but challenging for flight schools. “We’ve started to see turnover of flight instructors, said Byrnes. “We have lost 17 instructors in the last few months to airlines.”

The 2020-2039 Boeing Pilot and Technician Outlook projected a need for 763,000 new civil aviation pilots across the next 20 years, most of which will fly for Part 121 operations. Whether those projections hold up now that the airline recovery is underway is anyone’s guess.

Airline traffic may be improving. But the good news is double-edged. The virus provided a temporary respite for airlines desperate to cut costs. They parked airplanes, furloughed pilots, granted voluntary leave programs, dropped and cutback routes and offered early retirement packages for senior pilots, many of whom accepted.

“This sooner-than-expected recovery will require airlines to hire and train thousands of already certified ATP pilots to offset the resurgence of the pilot shortage,” said Oliver Wyman’s Murray.

Whether hiring will come with financial aid to help pay for training has yet to be determined.

A Helping Hand

IATA’s International Airline Training Fund provides training funding for airlines in developing nations, primarily Africa. In 2019, IATF training activities were halted due to the Covid-19 pandemic. In June 2020, the IATF Virtual Training Program was launched. Thirty-one virtual courses were delivered to 467 participants from 74 African aviation organizations. Funding for the effort is provided entirely by IATA. At one time, IATA membership paid a portion of funding.

The training courses are offered to help airlines enhance their operational safety processes to “help them undergo a successful IATA Operational Safety Audit (IOSA),” according to IATA material provided to CAT. “Data shows that airlines on the IOSA registry, in aggregate, outperform airlines that are not on the IOSA registry…” For 2020, the all-accident rate for airlines on the IOSA registry was nearly three times better than that of non-IOSA airlines,” stated IATA.

Some of the training focuses on helping airlines prepare for the IATA Standard Safety Assessment (ISSA), which is mean for operators of small aircraft that are not eligible for the IOSA program.

Further Reading