Pilot income

Hi Phil,

I just saw Michael Moore's "Capitalism: A Love Story" this weekend,
and among other things he discusses the "shockingly" low wages of
commercial airline pilots. Those flying for regional airlines often
had to take side jobs (waitress, in one case) to make ends meet.

Since you're in the business of training pilots, I wonder if you had
any comment on this. Is it a simple matter of supply and demand
(flying is fun -> lots of people want to be pilots -> many pilots
competing for fixed number of jobs) or are there other forces at work?

Thanks,
jp

-- J. Peterson, October 13, 2009

Answers

Airline pilot salaries aren't a very good example of capitalism because they are almost entirely determined by government regulation. The government forces airlines to recognize unions, just as other U.S. employers are forced to do. Unlike an industrial employer, however, an airline cannot hire replacement workers in the event of a strike by a pilots' union. The FAA will not allow an airline that operates Boeing 737s, for example, to hire captains and first officers from some other domestic airline that flies the same airplane. Flight crews have to have specific experience with their airline's "op specs".

Because of this dual regulation, it doesn't make sense for the pilots' union to accept less than 100 percent of an airline's potential profits and consequently pilots on average are able to capture most of the money generated by airlines. (In fact, sometimes the union contract demands more money than the airline will ever have, in which case the airline needs to go through Chapter 11 bankruptcy to reset the contract.)

Given that pilots as a group are getting all of the profits, someone then has to decide how it gets split up. The airlines don't really care, though the handful of non-union charter operations show that a moderately flat pay scale is what management would prefer, and with all pilots having the same schedule. Who gets to decide? The union leaders. Who are the union leaders? Senior pilots at major airlines. What's the result? Senior pilots at major airlines get $200,000 per year and may work as little as 10 days per month. The only way for this to happen without the pot of money being exhausted is for junior pilots at regional airlines to get $20,000 per year and work 22 days per month, 16 hours per day (of course this isn't all flight time; there is a lot of unpaid waiting time at various airports).

Why would someone work for $20,000 per year, 22 days/month, 16 hours/day? If a person started the career young, and chose a regional airline that was growing or losing its captains due to boom times elsewhere, he or she could upgrade to captain at the regional and then move over to a major airline as a first officer, possibly becoming a highly paid major airline captain by age 40. If the economy is doing poorly or the pilot picks an airline that ends up struggling or shrinking, the major airline captain job may recede into the distance.

The New York Times covered this issue to some extent yesterday: http://www.nytimes.com/2009/10/14/business/economy/14income.html in a story about a captain at a regional airline who was downgraded to first officer when the company shrank (quite a few first officers would have been laid off altogether). The story is about evil employers who cut employee pay, but really it is the union contract that ensured his pay had to be cut. There aren't enough profits for the airline to pay everyone the union- negotiated captain's salary!

For an 18-year-old who wants to fly, becoming an airline pilot is not a bad career. Most of the flight time required can be built up by working as an instructor during the 18-22-year-old college years. The kid can live at home while pursuing an inexpensive online bachelor's degree in Aviation from Utah Valley University. The kid has plenty of time to ride out the cycles of the industry. If the kid is female, assuming that she meets the FAA minimum qualifications, she will get hired ahead of all male candidates for an airline job.

Anyway, regional airline first officers don't make too much money, but it isn't a terrible job for a 23-year-old still living at home and the salary has almost nothing to do with capitalism or the free market.

-- Philip Greenspun, October 14, 2009