Carolina Larsson was in her mid-30s and working at an investment bank in New York City when she overheard a co-worker talk about flight lessons. Soon she was taking lessons at the same flight school and plotting a career change.
“I emptied my 401(k) and I maxed my credit cards and I borrowed money from friends,” she said of taking the first steps toward becoming an airline pilot, which she estimated cost her about $100,000 over several years. “I went all in. I just hoped it would pay off.”
Ten years later, Larsson is a first officer at a regional airline on the East Coast, mulling her next career stage, a move made slightly more complicated by her recent marriage to another pilot. But there’s a strong chance the newlyweds will have plenty of career choices in the months to come.
That’s because the pandemic heated a simmering pilot shortage to boiling point, leaving U.S. airlines scrambling to hire enough pilots to get flight schedules back to full capacity. The shortage is expected to limit capacity growth, and be a factor in higher ticket prices.
Not a ‘temporary issue’
U.S. airlines received billions in government loans in 2020 to make payroll as travel restrictions, put in place around the world to curb the spread of the novel coronavirus, caused a sharp decline in bookings.
The airlines went into cash-conservation mode, especially when they were in between the two tranches of government loans. The carriers cut down on capacity and implemented hiring freezes and cost-cutting measures. Crucially, they also offered their pilots, among their highest-paid personnel, incentives to retire early.
Airline pilots must retire by age 65, a limit raised in 2007 from age 60, and the industry was prepared for retirement waves as pilots from the baby-boomer generation were approaching that threshold.
Those waves would have spanned two to three years, Raymond James analyst Savanthi Syth told MarketWatch. With the pandemic, “they happened all at once,” Syth said.
Flight schools were also getting hit and graduating fewer pilots. Many schools had to close doors under public-health orders, offering flight students fewer opportunities to build the flight hours they need to qualify and slowing graduation rates.
After air travel demand started picking up, flight-school instructors started leaving to become pilots themselves, leading to other training bottlenecks. Moreover, a pilot hired today may get a better offer from another airline tomorrow.
“There’s just a lot of movement,” Syth said. “Today as a pilot you are in a very sweet spot, you can become a pilot in a legacy carrier faster than ever.”
Aviation-training company CAE Inc. CAE, +1.07% CAE, +0.93% forecast that more than 264,000 new pilots will be needed globally over the next 10 years, in addition to some 45,000 pilots needed to fly corporate jets.
That includes about 219,000 airline pilots, with 65,000 needed in North America alone, a CAE spokesman told MarketWatch.
On an even longer time horizon, Boeing Co. BA, +4.10% estimated last year that demand for newly qualified aviation personnel remains strong, with 612,000 new pilots, 626,000 new maintenance technicians and 886,000 new cabin crew members needed to fly and maintain the global commercial fleet through the next 20 years.
Pilot recruitment and advisory service FAPA.aero has estimated that major U.S. airlines hired a record 5,426 pilots last year, and are expected to hire about 9,540 this year.
In a call after United Airlines Holdings Inc.’s UAL, +5.97% second-quarter earnings in April, United Chief Executive Scott Kirby said United was “ramping up” to hire about 200 pilots this year, but the shortage is a major growth roadblock for smaller airlines, including those regional carriers flying for United. “This is not a temporary issue,” he said.
Flight-training is fragmented, too. CAE graduates about 1,500 new pilots a year, but there are dozens of smaller schools graduating just a handful of pilots each year.
All told, the industry creates an estimated 5,000 to 7,000 pilots a year, and has to hire about 13,000 this year with similar to slightly higher numbers for 2023.
Once hired, a newly minted passenger or cargo airline pilot will need four to five months of training, usually, within the air carrier they chose.
Passenger airlines also were caught by surprise by how quickly air-travel demand was coming back, starting in the spring of last year, Syth said. “It went from zero to 60 very fast,” and airlines have been doing the most hiring she has ever seen.
Hiring new pilots has patterns: usually, regional airlines — which fly small-market, short-haul routes for different airlines — are viewed as a stepping stone toward becoming a pilot for larger airlines.
After six to nine years at a regional airline, a pilot would then move on to a legacy airline. Ultra low-cost air carriers changed that equation a little, hiring from regional airlines and offering pilots more choice of home bases. The career is going through a generational change, but still attracts younger people and still has plenty of cachet.
“People are passionate about it,” Syth said.
Capacity ‘creak’ and fewer flights
The median annual wage for airline pilots, co-pilots, and flight engineers was $202,180 in May 2021, according to the Labor Department.
The department projects growth of 13% for the employment of airline as well as commercial pilots through 2030, faster than the average 8% growth for all occupations.
U.S. airlines need to hire about 10,000 to 15,000 pilots a year, and they are hiring about 13,000 this year, so they are meeting their needs, but it’s getting harder and harder and it will be tight for another couple of years, Syth said.
Rising fuel prices and not enough pilots are the main capacity constraints for airlines, and consumers are seeing it play out in fare prices.
The latest Consumer Price Index report showed that airline fares “continued to rise sharply,” up nearly 19% in April and the largest one-month increase since the inception of the data in 1963.
Cancellations, which hit about 6% of U.S. flights in January amid a surge in omicron COVID cases that sidelined airline personnel, are hovering around 1% in May.
Travel website Hopper estimated recently that airfares around Memorial Day, which kicks off summer travel, are about 30% more expensive than in 2019, with the average domestic airfare at around $394 per round trip.
“The pilot shortage is going to manifest itself with reduced service, reduced frequencies,” and airlines flying larger aircraft to compensate for that, said Geoff Murray, a partner with consultancy Oliver Wyman.
“Supply in North America won’t be able to meet demand,” especially in medium-sized cities, he said. A city that might have had two daily flights to a larger city on a 50-seater plane, say, may be left with one flight on a 70-seater aircraft, Murray said.
Airlines need to preserve their more profitable slots, such as flights to popular vacation spots and wide-body trans-Atlantic flights with tiered cabin services. So “the top of the pyramid,” the wide-body flights and the destinations, is likely to remain unchanged, Murray said.
As to how long the shortage may take to work itself out, Murray estimated “at least five years, if not longer, and the clock started in 2022.”
Murray has predicted that the more likely scenario is for a global gap of 34,000 pilots by 2025, which could turn out to be as high as 50,000.
“It’s hard to see our way through it,” said Peter McNally, an analyst with Third Bridge. Airlines are worrying about the three Cs, he said: costs, capacity, and consolidation.
“Costs are still going up, capacity is slow to add, and consolidation is still a big question mark,” McNally said. The shortage is a structural problem, and wages are the No. 1 cost for airlines, and it has manifested itself “at the slow capacity creak that we are getting.”
McNally predicts that United and other majors “will be ok” for the most part, but we are going to see reduced schedules, perhaps even for the majors, though 2022, that “will limit capacity and hurt consumers.”
‘Zero regrets’
For Larsson, learning to pilot a plane appealed to her adventurous side and a fascination with aircraft going back to her childhood spent split between Spain and Sweden.
Living in New York as an adult and working at Nordic investment bank Carnegie, she felt that most people in the industry were in it to make money. She left investment banking 10 years ago.
“Very few people would say, ‘I love this job,’” Larsson said. “You start to enjoy it because it’s your job, but in general I sensed that people were not genuinely happy in the financial industry, and that was something I felt coming to this industry: people were happy.”
“You don’t really get into flying by accident. Most people get into flying because they love what they do,” she said.
Larsson was in line to become a captain at her regional airline before COVID hit, and hope that is now back in horizon. Ideally, she and her partner want to be based in the same city.
She has dealt with a few recalcitrant passengers in the last few months, mostly not wanting to follow mask mandates, but acknowledges that flight attendants bore the brunt of the problems created, with pilots like herself relatively insulated.
“I have zero regrets, none. It’s amazing. I’m still living my dream.”