Did we reach the next phase of the pilot shortage?

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Zaibatsu
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Re: Did we reach the next phase of the pilot shortage?

Post by Zaibatsu »

photofly wrote: Sat Mar 17, 2018 10:31 am Personally I think we’ll see single pilot transport operations sooner rather than later.
less new pilots
Fewer, not less.
We'll have liquid pilots in the future.
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CanadianPilotQc
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Re: Did we reach the next phase of the pilot shortage?

Post by CanadianPilotQc »

well the hiring in the regionals slowed down a little at least compared to last year. we'll see.
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Diadem
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Re: Did we reach the next phase of the pilot shortage?

Post by Diadem »

photofly wrote: Fri Mar 16, 2018 7:48 pm If my profit is 8% of turnover, then I can borrow money, or sell shares, or whatever. If my profit is 6% of turnover I can’t. My investors will go and put their money in a burger bar where the margin is 7.9%. Unlike you, money isn’t wedded to the flight training business, it goes where the margins are best.
How many flight schools are publically traded, or have investors of any kind? The mom-and-pop schools aren't run by people who are concerned how the margins are going to affect the IPO; they just want to take home enough profit to pay their mortgages and buy groceries.
Let's throw some actual numbers at this, completely off the top of my head. Let's say rent is $2000/month, insurance is $1000/month, the local MRO gives a flat rate of $2000/month, and utilities, coffee, and miscellaneous expenses are $1000/month, for a total cost of $6000. Instructors are only paid if they fly, which means the school also makes money when they're working, so there's no overhead for employees who aren't productive. The instructor fee is $50/hr, half of which goes to the school, and rentals are $150/hr. If the fleet flies 100 hours/month solo and 50 hours/month dual, this gives a revenue of $25000. Take out the instructor pay and the fixed costs, and profits are $17750, giving a margin of 71%.
Now, demand for pilots has gone up, and no one is willing to instruct for $25/hr anymore when they can go to Jazz. If the school doesn't raise wages, they will lose the majority of their revenue. The only rentals will be done by licenced pilots, who tend to perform a very small amount of the flying at any school, and it's unlikely it would even be enough to cover their costs. So the school has no choice but to raise wages if they want to keep the doors open. If they increase the instructor fee to $125 and continue taking their $25 cut, they can retain enough instructors to stay in operation, and for argument's sake let's say they're flying the same number of hours per month. The revenue increases to $28750, the costs increase to $11000, and, critically, the actual amount of money taken home by the owner remains the same at $17750. Now, the CFOs of those schools listed on the NYSE might be concerned that the margin drops to 62%, but most owners don't care about maintaining an arbitrary margin to please investors, because they don't have investors.
What if the owner does what you're saying, and raises the fee sufficiently to keep that 71% margin? The instructor fee has to go up to $300, and if all else is equal then revenue will increase to $37500, costs won't change, and the absolute amount of profit goes up to $26500. Of course, the big thing that you're missing is that it won't all be equal; even a single penny increase in rates will cause a decrease in the number of customers. The greater the increase in rates, the greater the loss of customers, so if the owner increased the fee to $125 there probably wouldn't still be 150 hours/month of flying; it might drop to somewhere around 125 or so, but at least the school would still be in operation. If the owner increased the rate from $50 to $300, the number of students would plummet, and let's say the amount of flying each month would drop to 25 hours each of dual and solo. That gives revenues of $15000, costs of $8500 including wages, and profits of $6500 with a margin of 43%. In your zeal to maintain your margin, you've actually reduced both the amount of money that you'll take home, and your profit margin, because you failed to factor in that any increase beyond that needed to cover the increased wages will cause ever-diminishing revenues. There's no possible way that you'll keep the same amount of business by increasing your fee six-fold, so you can't possibly maintain that margin.
If you increased your fee to $300, and the school next door only increased theirs to $125, where do you think your students will go? You may actually end up causing their business to increase by driving your customers to them. If you don't increase your fee because you don't want to hurt your precious margins, then either you won't have any instructors and you won't be in business, or you'll end up paying out of your profits to retain them, which defeats the purpose.
In this case, airline ticket prices have to go up so fewer people want to fly and we have fewer airplanes that need pilots.
That's going to take a while, and in the meantime schools are faced with the immediate need to retain instructors. If they wait until demand for airline tickets decreases, they're going to be out of business.
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photofly
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Re: Did we reach the next phase of the pilot shortage?

Post by photofly »

profits are $17750, giving a margin of 71%.
I don’t think one needs to read any further.
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Re: Did we reach the next phase of the pilot shortage?

Post by Diadem »

photofly wrote: Sat Mar 17, 2018 8:37 pm I don’t think one needs to read any further.
The actual numbers don't matter. Make your own model if you don't like it, because I'd love to see how you intend to increase a fee multiple times and not drive off so much business that you end up losing money. Hell, why don't you present your proposal to a few flight schools and see how well it's received.
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photofly
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Re: Did we reach the next phase of the pilot shortage?

Post by photofly »

I don’t need to. I already know how well the whole $125/hr primary instructor thing will go down. Like a brick. Which is my point.
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Re: Did we reach the next phase of the pilot shortage?

Post by Diadem »

photofly wrote: Sun Mar 18, 2018 11:39 am I don’t need to. I already know how well the whole $125/hr primary instructor thing will go down. Like a brick. Which is my point.
Okay, then what do you propose be done to retain instructors who aren't willing to work for $25/hr?
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photofly
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Re: Did we reach the next phase of the pilot shortage?

Post by photofly »

Diadem wrote: Sun Mar 18, 2018 12:18 pm
photofly wrote: Sun Mar 18, 2018 11:39 am I don’t need to. I already know how well the whole $125/hr primary instructor thing will go down. Like a brick. Which is my point.
Okay, then what do you propose be done to retain instructors who aren't willing to work for $25/hr?
The problem isn’t that instructors won’t hang around; the problem is that we can’t train enough pilots.

I’d scrap most or all of the government regulation surrounding flight training and FTU’s, and let market forces do the rest.
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Diadem
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Re: Did we reach the next phase of the pilot shortage?

Post by Diadem »

photofly wrote: Sun Mar 18, 2018 2:09 pm The problem isn’t that instructors won’t hang around; the problem is that we can’t train enough pilots.

I’d scrap most or all of the government regulation surrounding flight training and FTU’s, and let market forces do the rest.
Oh my god... Are you being intentionally obtuse? Why can't we train enough pilots? Because the schools don't have enough instructors! Why don't they gave enough instructors? Because they'd rather go to Jazz than make $25/hr. The market solution is to pay them more. Eventually we'll run out of class 1s, and someday there won't be anyone to train the next generation of pilots.
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Re: Did we reach the next phase of the pilot shortage?

Post by Big Pistons Forever »

I personally don’t think it matters how much you pay. Most instructors want to go to the airlines. Double the pay and they are still going to leave as soon as they get an interview because the sooner they get on the better seniority number they will have. I think Industry has to take some responsibility for the supply of their pilots. A big step would be to hire instructors, give them a seniority number but set a guaranteed course date a year out so that they can stay instructing, ideally with a bonus at the end of that year.

Sponsored instructor ratings would also be a way for airlines to step up to the plate. If hiring keeps going at this rate the airlines are going to end up parking airplanes due to lack of crew, which is going to cost a lot more than investing in the increased supply of pilots.
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photofly
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Re: Did we reach the next phase of the pilot shortage?

Post by photofly »

I am not being obtuse.

If a school were suddenly to offer its instructors $125 to teach, it would have plenty of instructors but no students. If the market rate for an instructor becomes $125/hr so that every school pays that, the cost of training will be so high fewer pilots will be able to afford the training.

Either way the goal of more pilots being trained has not been achieved.

Let's suppose we had a nirvana of very light government regulation. Now if I were to propose the introduction of burdensome government regulation along the following lines:
* All aircraft used for training must be operated on the commercial register and maintained only by an AMO
* New instructors must work on average six months under the direct supervison of a Class 1 or 2 instructor and are forbidden to teach when their supervisor isn't around
* anyone who wants to open a flight school is in for 24 - 36 months of government bureaucracy before they can get started, paperwork audits every two years or more often, etc etc.
* provincial legislation in at least two - probably more - provinces requires provincial government approval and oversight of any school providing CPL or instructor rating training, along with a 10% levy on fees paid to the provincial government

If I were to propose that - then I think the idea that these regulations would impede the flow of pilot training and reduce the number of pilots trained - would be uncontroversial. You yourself might even be leading the charge against them on that ground.

Why then do you find it difficult to accept the converse proposition, that removing these existing regulations would allow more pilots to train?


You cannot mandate instructors to stay at a flight school against their will, and under present conditions nobody can afford to pay them more than the next tier of airlines.

If we did try to pay them $125/hr, under present conditions, airlines like Jazz would simply pay $150-200 per hour instead. Any airline that couldn't, would go under. We still wouldn't have more pilots trained.


In general if you want more of something - wheat, gold mining, pilot training, whatever, you reduce the barriers to entry of that industry. If you do that there's more money available to pay people and more flexibility for those who aren't interested only in the money.

The government could make a good start, tomorrow.
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digits_
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Re: Did we reach the next phase of the pilot shortage?

Post by digits_ »

photofly wrote: Sun Mar 18, 2018 2:43 pm

If we did try to pay them $125/hr, under present conditions, airlines like Jazz would simply pay $150-200 per hour instead. Any airline that couldn't, would go under. We still wouldn't have more pilots trained.

Yes and no. The pilots who secretly want to go to the airlines but would be instructing "for the money" would indeed switch jobs for the pay raise you would get at Jazz in your case.
The pilots who want to be instructors -they exist- would, however, stay. These pilots are leaving instructing nowadays as well, as it is pretty hard to have a decent lifestyle on 25 CAD/hour. If you pay 125, and jazz pays 150, they would stick around because you can have a pretty good lifestyle on 125 CAD/hour.

Once you have certain income, more money doesn't make you happier. But you do need to reach that level of income first.
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Re: Did we reach the next phase of the pilot shortage?

Post by photofly »

If you pay 125, and jazz pays 150, they would stick around because you can have a pretty good lifestyle on 125 CAD/hour.
Then Jazz will pay $200, or $250, or $300, until the otherwise-happy pilot's wife makes him go and work for Jazz, instead. You still won't get more pilots. ($125 may be your price for a decent lifestyle, but not everyone is that cheap.)



Here's another suggestion for how to improve the pilot shortage:

Make Marc Garneau's performance bonus dependent on the number of CPL licences issued. It would happen within three months.
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digits_
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Re: Did we reach the next phase of the pilot shortage?

Post by digits_ »

photofly wrote: Sun Mar 18, 2018 2:59 pm
Then Jazz will pay $200, or $250, or $300, until the otherwise-happy pilot's wife makes him go and work for Jazz, instead. You still won't get more pilots. ($125 may be your price for a decent lifestyle, but not everyone is that cheap.)
Now now, don't go calling me cheap there.

In the 125 CAD/hour example, maybe 1% of the pilot population will be instructors, maybe even less? Why would Jazz double their salaries to try and attract such a small amount of pilots? That's not gonna happen. I hope I'm wrong, but I highly doubt it.
Even today, they are turning away pilots based on silly psych evals.
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Re: Did we reach the next phase of the pilot shortage?

Post by photofly »

Don't call you cheap?? To paraphrase Churchill, we already know what you are, we're just haggling over the price.

If 1% of the pilot population at any given time are instructors, and therefore it's not worth Jazz hiring them away - then that same 1% is too few to fill the gaping voids at your flight schools.

You can't mandate what salary should be "good enough" for people. The dismal command economy experiment that was called the Soviet Union proved that.
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Last edited by photofly on Sun Mar 18, 2018 3:14 pm, edited 1 time in total.
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Re: Did we reach the next phase of the pilot shortage?

Post by photofly »

...
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Re: Did we reach the next phase of the pilot shortage?

Post by digits_ »

photofly wrote: Sun Mar 18, 2018 3:12 pm If 1% of the pilot population at any given time are instructors, and therefore it's not worth Jazz hiring them away - then that same 1% is too few to fill the gaping voids at your flight schools.
In the hypothetical situation as discussed:
It's not worth it to Jazz to double the salary of ALL their junior pilots to get a few extra pilots.
It's worth it for flight schools to increase the salary of ALL their pilots because they'll loose them all in the next 6 months if they don't.
photofly wrote: Sun Mar 18, 2018 3:12 pm You can't mandate what salary should be "good enough" for people. The dismal command economy experiment that was called the Soviet Union proved that.
I'm not mandating anything. I am estimating and trying to predict what would happen in hyothetical situations. Just like you've been doing here.
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Re: Did we reach the next phase of the pilot shortage?

Post by photofly »

digits_ wrote: Sun Mar 18, 2018 3:21 pm It's worth it for flight schools to increase the salary of ALL their pilots because they'll loose them all...
Lose, not loose. And no they won't lose them all. Not the ones that only have three hundred hours, and not the ones with the wooden leg and that personal hygiene problem I promised never to talk about.

And, the flight school can pay some instructors more - the more senior ones - rather more easily than Jazz can, so they don't need to double the pay of every instructor.

Overall, It's not an all-or-nothing situation.

As far as who should do what, there are two things, both of which need government support:

1. reduced regulation
2. single pilot transport operations

Otherwise it's fewer airline flights and higher ticket prices. You can't have it all, you know.
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Re: Did we reach the next phase of the pilot shortage?

Post by Squaretail »

If the government were to do anything else, it would also be that it needs to encourage more kids to get into aviation, and make the entrance to it easier. From what I've seen you can get all the funding in the world to chase a career as a dancer, play the violin, or add to the growing list of yoga instructors, but heaven forbid if you want to become a pilot. It was difficult when I started a long time ago, and its only gotten worse. From what I've seen enrollments into pilot programs have been steadily declining from domestic students, there were some articles in AOPA regarding it recently as I recall, and last time I saw any licensing stats here bore it out, especially for instructor rating and CPL applications.

For starters when it comes to regulations, it certainly needs to be easier to retain an instructor rating. Up the validity lengths, and make it so its easier to get a refresher course done. Might get more people of the "experienced" crowd to stay in the game.

But that's just small fry. The main problem is that there is a bottleneck forming with training pilots, but people ignore some of the main points about it. First, increase in pay won't keep instructors. Instructing has several problems as a career. It has no growth, one can't ignore the pull of big iron for pilots. I would speculate that even if you were paying instructors $125/hr, Jazz could poach them at $100/hr. For instructors after all, going up the rank has a top - becoming a class 1 - and most of the advancement means less time flying and more time on the ground. Not what most people want to do as pilots. At any school of course, that advancement may be shorter if there are already some full time guys doing all the advanced training or management. There's also just the problem that mass production flight training just plain sucks to do. Somewhat soul crushing.
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I'm not sure what's more depressing: That everyone has a price, or how low the price always is.
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Re: Did we reach the next phase of the pilot shortage?

Post by gtanorth »

digits_ wrote: Sun Mar 18, 2018 3:21 pm
photofly wrote: Sun Mar 18, 2018 3:12 pm If 1% of the pilot population at any given time are instructors, and therefore it's not worth Jazz hiring them away - then that same 1% is too few to fill the gaping voids at your flight schools.
In the hypothetical situation as discussed:
It's not worth it to Jazz to double the salary of ALL their junior pilots to get a few extra pilots.
It's worth it for flight schools to increase the salary of ALL their pilots because they'll loose them all in the next 6 months if they don't.
photofly wrote: Sun Mar 18, 2018 3:12 pm You can't mandate what salary should be "good enough" for people. The dismal command economy experiment that was called the Soviet Union proved that.
I'm not mandating anything. I am estimating and trying to predict what would happen in hyothetical situations. Just like you've been doing here.
How much would you need to get paid to be an instructor and not fly a 787 at some point of normal progression if you go to AC or WJ.... 100K a year, 150K, 200K
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