Say your hired by age 40....

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KAG
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Say your hired by age 40....

#1 Post by KAG » Mon Dec 22, 2014 6:24 am

So this topic had been floating around our flight decks and I thought I'd ask. What would a career look like at AC (rouge) in terms of scheduling, pay, pension etc, if they were to join the AC team by say 40?
Given the massive retirements about to hit, I would assume your life would get pretty good pretty quick.
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Re: Say your hired by age 40....

#2 Post by Fanblade » Mon Dec 22, 2014 10:57 am

Well I think the fact that new hires are being sent to mainline rather than Rouge speaks volumes. Current junior members are favoring Rouge over reserve or very junior positions at mainline. So be prepared to do a possible stint at mainline. The last bid had zero Rouge vacancies. The last class was all 320 mainline as I understand.

But that is temporary.

New hire Junior mainline 320 versus Rouge.

No reserve. Same pay. Less days worked. Better chance of overtime. Fair share schedule and vacation.

As seniority increases these attributes begin to work in the opposite direction and people are migrating back to mainline.

Retirement attrition.

First thing I would like to point out is that retirement attrition is not temporary. 3000 pilots. Average 30 year career. 3.333333333% would be expected to retire on average every year. Thats 100/ year. This is the primary difference between a legacy type carrier such as AC and other carriers. AC is a fixed pace. Not fast. Not slow. An upstart has fast progression and higher risk. Medium term slow progression as there isn't much age difference from junior to senior.

I point this out because at any airline, unless it is an upstart, progression will mostly be dictated by retirement attrition. Not growth. In the case of AC it would be pretty safe to guess that after 25 years a pilot will retire about 2500 numbers lower than he started. The retirement bubble people talk about is really just a period of time over and above this average.

Yes once retirements rekick in 2017. 700 over the five years. 1000 over the 7 years. Caveat. This assumes 65 is a BFOR or ICAO does not move their age 65 recommendation.

Remember this is from 2017 onwards. So the class hired in Dec will likely be 700 numbers more senior by 2022. That's eight years from now, not 5, and would not hold a Rouge 319 CA on today's list. Close, but not quite.

With that said. Less than 10 years to the left seat at Rouge and likely a WB captain by the end of a 25 year career? Pretty good I'd say.

As for growth. AC is in massive ASM growth mode. This does not translate into job growth. Getting rid of 20 EMJ's and replacing them with 10 32X's paints the picture quite well. Although AC will experience a lot of Wide body growth they will also experience a lot of NB shrinkage. We will slowly see more and more wide bodies flying transcon. How much job growth this creates is debatable depending on who you ask.

My take? AC will grow in pilot numbers, but not by a lot. Retirement attrition will continue to provide the vast majority of progression.

With that said with a higher wide body ratio people will be wide body CA and FO sooner/ more junior than current.
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Last edited by Fanblade on Tue Dec 23, 2014 9:51 am, edited 1 time in total.

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Re: Say your hired by age 40....

#3 Post by KAG » Mon Dec 22, 2014 1:53 pm

Thanks for the reply.
So what about the pension between rouge or mainline. One is a DB, the other DC. If your hired at mainline today and go to rouge do you keep you DB pension or are all new hire DC? How does 25 years count pension wise?
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Re: Say your hired by age 40....

#4 Post by Fanblade » Mon Dec 22, 2014 2:54 pm

KAG wrote:Thanks for the reply.
So what about the pension between rouge or mainline. One is a DB, the other DC. If your hired at mainline today and go to rouge do you keep you DB pension or are all new hire DC? How does 25 years count pension wise?
All new hires are DC pension.

Max employee contribution 6%. 100% company matching. Slow increase to another 75% company matching after 5 years. For a total of 16.5%
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Re: Say your hired by age 40....

#5 Post by Joe Blow Schmo » Tue Dec 23, 2014 7:01 am

Fanblade wrote: First thing I would like to point out is that retirement attrition is not temporary. 3000 pilots. Average 30 year career. 1% would be expected to retire on average every year. Thats 100/ year.
3.33%.

JBS aka Math Nazi.
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Re: Say your hired by age 40....

#6 Post by Fanblade » Tue Dec 23, 2014 9:49 am

Joe Blow Schmo wrote:
Fanblade wrote: First thing I would like to point out is that retirement attrition is not temporary. 3000 pilots. Average 30 year career. 1% would be expected to retire on average every year. Thats 100/ year.
3.33%.

JBS aka Math Nazi.
Good catch!

Corrected
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Re: Say your hired by age 40....

#7 Post by gearDown2green » Tue Dec 23, 2014 4:46 pm

So if you got hired at 40 and don't lose your medical until 65 ...

It's hard to tell precisely but based on a totally random average :mrgreen: of

50.000$ the first 2 years
60.000$ years 3-4
90.000$ year 5
130.000$ the next 10 years
190.000$ the last 10 years

Assuming you top your DC plan to the max every year

You would contribute to a total of roughly 210.000$ while the company would put
360.000$.

Your total pension would be shy of 600.000$ in 2040

If you plan on living until 85 then that's 30.000$/year.

So you better hope your investment rate on your DC plan stays above ground level :lol:
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Re: Say your hired by age 40....

#8 Post by TheStig » Tue Dec 23, 2014 5:47 pm

geardown2green, that post displays a complete lack of understanding of how compound interest works. See a financial planner.
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Re: Say your hired by age 40....

#9 Post by CanadianEh » Tue Dec 23, 2014 6:04 pm

TheStig wrote:geardown2green, that post displays a complete lack of understanding of how compound interest works. See a financial planner.
Compound interest calculations are wishful thinking in the financial markets of today
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Re: Say your hired by age 40....

#10 Post by gearDown2green » Tue Dec 23, 2014 6:44 pm

If I understand correctly the amount that goes into the DC plan every year is based on your annual gross income.

So I just wrote roughly what you may expect to put and to get from the company in 25 years because it depends on (too) many things.

And I definitely can not talk about compound interest because it varies with every indivual depending on the investment plan they have, as well as the market fluctuations ...

but if your financial planner guarantees me 7% a year for the next 25 years and not below 10% between 2030 and 2040 then you can definitely send me his coordinates !
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Re: Say your hired by age 40....

#11 Post by gearDown2green » Tue Dec 23, 2014 8:00 pm

As of my understanding of compound interests I would put it simply this way :

Based on a fix 7% rate of interest a year and on the previous average wages :

Total in your DC plan would be roughly :

Year 1-2 : 6000 x (1,07^24).[1 + 1,07] +
Year 3-4 : 9000 x (1,07^22).[1 + 1,07] +
Year 5 : 13500 x 1.07^21 +
Year 6-15 : ~ 20000 x 1.07^20 + 21000 x 1,07^19 + ... + 24500 x 1,07^11 +
Year 16-25 : 24500 x 1,07^10 + 24500 x 1,07^9 + ... + 24500 x 1.07

(I think the plan is currently topped up at 24500$ a year)

Is that what you were looking for TheStig ?
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Re: Say your hired by age 40....

#12 Post by Fanblade » Tue Dec 23, 2014 8:52 pm

TheStig wrote:geardown2green, that post displays a complete lack of understanding of how compound interest works. See a financial planner.
Agreed.

Guys there are good free retirement calculators everywhere.

An average of 24,000/year contributed for 25 years at a 1% rate of return is a little over 800K. 800K paid out over 20 years at a rate of return of 1% is 44K/year.

A ROI of 2% is 55K/ year. A ROI of 3% 67K/year.

Add CCP and old age security? In all cases the retirement income is greater than the average single person working income today

Moreover this individual is 40 when he starts. We are assuming he doesn't have a pot to piss in at that age.

I'm not suggesting the DC plan doesn't need improving because it does. The reopener in 2017 has language to address it.

One of the.options will hopefully be a new type of pension. TB or targeted benefit. Kind of like a DC/DB hybrid.

But for those who want to figure out what the current AC pension is worth to them? Use a financial calculator. Stay conservative on any rate of return assumption you use, and you will have a descent ball park conservative estimate.
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Re: Say your hired by age 40....

#13 Post by gearDown2green » Wed Dec 24, 2014 4:52 am

Except that to be able to get 24.000/year in your plan you need a gross income of 145.000$

Not happening the first 10 ??? Years
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Re: Say your hired by age 40....

#14 Post by rudder » Wed Dec 24, 2014 8:33 am

One of the big attractions of an AC career was the DB benefit. And the best part was that contributions were income based even during low years but the benefit was income based solely on the highest 5 years.

You will never be able to replicate a DB benefit level with a DC plan that is subject to RCT/CRA contribution limits.

The pilots that will fare the best under the new system will not be 40 year olds with 25 potential years of DC participation but rather 25 year olds with 40 potential years of DC participation at a much higher average annual contribution income over that time span combined with the effects of compounding.

The older new-hires will hopefully already have some form of retirement savings accumulated already to partially offset the shortfall.
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Re: Say your hired by age 40....

#15 Post by Fanblade » Wed Dec 24, 2014 10:15 am

gearDown2green wrote:Except that to be able to get 24.000/year in your plan you need a gross income of 145.000$

Not happening the first 10 ??? Years
I was using your numbers. You came up with 600k over 25 years. 600k/25 years equals an average of 24k worth of contributions per year.

Whether your numbers are valid wasn't the point. I was simply trying to show how substantial the impact was when one started to assume even very low rates of return.

My comment remains the same. Use a financial calculator.
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Re: Say your hired by age 40....

#16 Post by TheStig » Wed Dec 24, 2014 11:07 am

rudder wrote:One of the big attractions of an AC career was the DB benefit. And the best part was that contributions were income based even during low years but the benefit was income based solely on the highest 5 years.

You will never be able to replicate a DB benefit level with a DC plan that is subject to RCT/CRA contribution limits.
Agreed, unfortunately that ship has sailed for AC's new hires, not just because it provides a more predictable/stable income in retirement, but also because the DC plan is going to cause pilots to chase the biggest paycheque possible to maximize their investments, instead of being able to sit back and enjoy senior positions.

The discussion KAG has started is a very interesting one though for pilots weighing their options between careers at WJ and AC. There are lots of variables for both groups, the biggest being careers progression and investment returns. The most obvious difference I can see between the two companies is that WJ's contribution amounts appear to be higher. However, the ESOP really isn't a pension and it's up to the individuals to sell their shares and save for retirement themselves. The AC DC plan is a retirement savings account with some tax advantages, but I'm certainly not an expert, maybe someone in the plan can weigh in here with some projections that they've been provided?
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Re: Say your hired by age 40....

#17 Post by Counterpoint » Tue Dec 30, 2014 6:02 am

KAG wrote:So this topic had been floating around our flight decks and I thought I'd ask. What would a career look like at AC (rouge) in terms of scheduling, pay, pension etc, if they were to join the AC team by say 40?
Given the massive retirements about to hit, I would assume your life would get pretty good pretty quick.
Thanks. Merry Christmas.
Regarding the last part of your post.

I'm not sure what retirements you are forecasting, but the general consensus seems to be they won't "hit" for at least another 5 years and until then won't be massive. There seems to be very little hiring at the moment, and the latest contract roadshow slides actually showed a decrease in pilot numbers in the short term. Couple that with DB pension incentives to stay longer, and I'm not sure "pretty quick" applies until about 2020.
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Re: Say your hired by age 40....

#18 Post by Fanblade » Tue Dec 30, 2014 10:58 am

Counterpoint wrote:
KAG wrote:So this topic had been floating around our flight decks and I thought I'd ask. What would a career look like at AC (rouge) in terms of scheduling, pay, pension etc, if they were to join the AC team by say 40?
Given the massive retirements about to hit, I would assume your life would get pretty good pretty quick.
Thanks. Merry Christmas.
Regarding the last part of your post.

I'm not sure what retirements you are forecasting, but the general consensus seems to be they won't "hit" for at least another 5 years and until then won't be massive. There seems to be very little hiring at the moment, and the latest contract roadshow slides actually showed a decrease in pilot numbers in the short term. Couple that with DB pension incentives to stay longer, and I'm not sure "pretty quick" applies until about 2020.
Unless ICAO changes its rules those who did not retire in Dec 2012 will be required to do so in Dec 2017. AC hires about a year to 8 months in advance. So sustained retirements/hiring can be no more than two years away.

The retirement bubble is not gone. It is simply delayed. When it does start up there will be a lot of movement. 1000 numbers in 7 years.

But you are right. In the very near term 20 EMJ will depart the fleet and be replaced with 10-12 larger aircraft. A year worth of 787's showing up takes care of this slack and don't forget 20% are choosing to retire.

I still think 2016 will see sustained hiring with trickling hiring up to that point.
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Re: Say your hired by age 40....

#19 Post by Counterpoint » Tue Dec 30, 2014 2:48 pm

Fanblade wrote:
Unless ICAO changes its rules those who did not retire in Dec 2012 will be required to do so in Dec 2017. AC hires about a year to 8 months in advance. So sustained retirements/hiring can be no more than two years away.

The retirement bubble is not gone. It is simply delayed. When it does start up there will be a lot of movement. 1000 numbers in 7 years.

But you are right. In the very near term 20 EMJ will depart the fleet and be replaced with 10-12 larger aircraft. A year worth of 787's showing up takes care of this slack and don't forget 20% are choosing to retire.

I still think 2016 will see sustained hiring with trickling hiring up to that point.
Of all the 59 year old ACPA pilots flying in 2012, less than five were eligible to FP60. All of them have retired. Of all the 59 year old ACPA pilots flying in 2013, 130 + were eligible to FP60. 80+ have retired and 50 remain. The oldest ACPA pilots will be turning 62 during 2015. Of all the 59 year old ACPA pilots flying in 2014, 150 + were eligible to FP60. 60+ have retired and 80+ remain. As of next month, of all the 59 year old ACPA pilots flying throughout 2015 (giving notice now, usually means a retirement in 2016) 150+ will be eligible to FP60. Almost 30 of that group have retired or have given notice and will retire in 2015, and 120+ intend to remain (haven't given notice).

Totalled up, that's around 440 59 year old ACPA pilots up until the end of 2015 that will be eligible to FP60. Only around 180 have retired, or have given notice. Around 260 remain. Which points to a retirement rate of about 40%, which may start decreasing because what we'll see as a retirement rate for next year's 59 year old ACPA pilots is so far at 20%.

As ACPA pilots retire watch carefully how many years of service they've put in. Over 140 ACPA pilots flying today have at least 35 years of service. That number will grow to 160+ by the end of 2015. 35 is magic number, and the rate of 35 years of service ACPA pilots is decreasing. Which could mean that many are staying to hit that magic number, or take advantage of the incentives to stay from the latest contract. Over 15 pilots flying now have over 40 Years (KAG was wondering what a pilot 40 years old new pilot can expect).

The ACPA bubble may be delay, or it may be smooth out and show constant retirements, but it will be much later than expected, especially when last fall's free from advance notice was mostly ignored. It's going to be difficult to predict when the "average" ACPA pilot will hang up the jepps.
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Re: Say your hired by age 40....

#20 Post by Fanblade » Tue Dec 30, 2014 10:16 pm

Counterpoint,

It is true we don't know where the new average age of retirement will land. All we know is that for the time being it can't be older than 65.

If the new average age of retirement becomes 65, progression will resume in 2017.

If the new average age of retirement becomes 64, progession will resume in 2016.

Even if the average age of retirement becomes 65, Air Canada will need to hire approximately 500 pilots by 2020 just to remain the same size as it is today.
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Re: Say your hired by age 40....

#21 Post by Counterpoint » Fri Jan 02, 2015 8:11 am

FB,

I think you're right. It will be very difficult to pinpoint where the new retirement age will end up. We can say that it is going to be higher than 60.

For starters, there will be no 65 year olds retiring in 2017 (they have already all retired), therefore progression if all the pilots go to 65 will not resume in 2017, but more like 2018 and only to handle those turning 64 (80+ at the moment) in 2017. Because there is very little concrete ACPA pilot position expansion until then, and pilots turning 60 in 2015 are overwhelmingly staying (a new trend), there is going to be very little hiring for the next 3 years.

If there were no FP60, then the ACPA ranks would be made up of approximately 260 new ACPA pilots by the end of 2015. That number will be more like 70 (including those hired in 2014).

AC has a big problem coming, and that means so does the ACPA. How are they going to train replacement ACPA pilots when they all decide to retire every year in the same month (MAY) ? Because the incentives provide extra cash dependant on the VACATION credits accumulated, one way is to use incentives to mitigate the choke point (MAY), the other is to ask the ACPA for a break on training by either using Pay-in-Lieu or some form of position pay. It is unfortunate that the ACPA doesn't get proactive with AC and start looking at solutions, but the ACPA leadership is now nothing more than an administrative team.

As I review your post, I think that replacement hiring by 2020 will be upwards of 800 (instead of 500) new ACPA pilots by 2020 (to remain the same size), but none of that hiring will happen until at least 2018. Unless, there is a major expansion of ACPA positions.

It is a real problem, and because the ACPA use a seniority system for career progression, the financial costs for training will be astronomical, but not until at least 2018. More of the ACPA pilots will FP60 as the years go by, because of the incentives to stay from the last contract, and because of the career progression system the ACPA use. Which is a shame for a new pilot, because it delays entry into the seniority system and may impede progression if the problem I'm supposing will happen. It's a system that relates progression from people leaving at the top, not people joining at the bottom.

All this changes if the EMJ stay etc., or more aircraft come before 2017 than already announced.
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Re: Say your hired by age 40....

#22 Post by rudder » Fri Jan 02, 2015 11:08 am

Even during the peak hiring cycles of the past, AC has never added in excess of 20-30 new-hires per month on a sustained basis in to the training system.

Sounds like AC will have to do some serious planning in order to accommodate the highest attrition rates in its history post-2017 combined with all of the equipment courses for existing AC pilots as they change aircraft type.

Still do not understand why at least a WB/NB status pay system was not considered. Add Rouge to the mix and it is just another layer of bidding/training complexity.
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