Stay or go? Senior Pilots’ Decisions About Early Departure Offers Will Affect The Future Of Thousands Of Their Colleagues And Their Airlines

The nation’s oldest airline pilots, generally between the ages of 60 and 65, are fast approaching deadlines for making decisions about whether to accept early retirement offers that could put up to $ 982,000 in their pockets now and at the same time. potentially save the jobs of several thousand young people. pilots and, perhaps, even their bearers fighting for bankruptcy.

But such decisions are also, in many cases, very risky for those high-ranking drivers.

By accepting such early departure offers, eligible pilots could see all that money, and the attractive perks like free rides and extended insurance benefits that come with that early retirement cash disappear into thin air. This is because if your airlines go bankrupt or stop operating completely before pilots who accept early retirement offers reach age 65, the money still owed to them at that time will likely never be paid. .

Conversely, if many older pilots don’t accept early retirement offers, not only would that require laying off thousands of younger pilots, but it could also help bankrupt their airlines, with all the challenges that come with it. financial impacts for pilots, both active and retired

The first such deadline is Wednesday. That’s when Southwest Airlines senior pilots must decide whether to accept what appears to be the most generous offer in the industry to retire early. According to KitDarby.com Aviation Consulting calculations, the maximum amount of cash that a Southwest pilot who retires with such incentives could get out of the deal would be $ 982,230. That assumes that a pilot has a full five years before reaching the federal mandatory retirement age for airline pilots, 65.

Alaska Airlines’ oldest captains also face a deadline on Wednesday to accept advance offers that, at most, would pay them roughly half of what Southwest pilots would get in cash. For Delta pilots, the decision deadline is Sunday for offers that would reach a maximum of $ 740,000 in cash plus benefits. The advance offer made to American pilots, for a maximum value of $ 715,599 in cash, has already been closed, but the company has not yet announced how many accepted the deal. United Airlines officials have said they are preparing a similar offer to their older pilots, but have not yet disclosed their details. Most smaller carriers also have extended, albeit less lucrative, deals on their older parcels.

“If you had the full time [three to five years before reaching age 65] get paid what they’re offering you, and if you flew the biggest planes in your airline’s fleet, these can be very attractive deals, “says Kit Darby, a long-standing professional advisor and consultant to pilots and others aviation professionals.

“But it all depends on whether your company remains in business after it leaves,” adds Darby, a retired airline pilot. “If they don’t, you probably won’t get all the money they said they would pay you no working the last three or five years of your career. “

Darby also notes that by rejecting early exit offers, older captains might, in normal times, expect to earn even more cash than they are offered to leave now. This is because each early departure offer is structured to pay pilots who accept the offer only for the minimum number of flight hours they would be guaranteed to pay if they remain on the job. These minimum hour guarantees vary between the carrier between 75 and 82 flight hours per month.

However, although prior to the arrival of the coronavirus earlier this year and the near collapse of air travel demand that followed, most pilots flew much more hours than the guaranteed minimum, few pilots now fly even enough hours to reach your guarantees. That means that currently, and perhaps for several years, active airline pilots will not have much or no opportunity to earn more money by flying more than the minimum number of hours guaranteed each month.

“So there are a lot of pilots burning a lot of midnight oil right now trying to figure out the best approach for them, financially,” says Darby. “There are a lot of variations in the value of these agreements because the situation of each pilot is different. Also, there are many pilots that if the government allowed us to fly after 65, they would. They love to fly. And if you love something, you want to do more, not less. For those people, the idea of ​​retiring early is not an initial option. ”

Meanwhile, while the stakes are high for individual pilots of older airlines, they may be even greater for younger ones, whose future is already at high risk and could worsen greatly if many older pilots reject the incentives to leave now.

Darby estimates that if enough senior captains accept the advance agreements, the big US airlines could keep the number of pilot layoffs at around 10,000, or perhaps even less. That would be out of an approximate total of about 100,000 currently active U.S. airline pilots.

“If you look at American, Delta and United, they all plan to offer a third fewer flights next year than last year. So just calculating roughly a 30% reduction across the board, that’s 30,000 pilots or more, “that will be overkill for the real needs of big airlines, he says.

“And if we assume that they don’t fire so many because firing the pilots is very expensive, and they just cut 20,000 pilot positions, if they can get 3,000 to 5,000 captains to leave early now, we have to have to say goodbye.” of only 15,000. And if they can find ways to avoid firing some of them by cutting other costs, they may need to fire only around 10,000. Of course, that number could also be much higher than that. It’s hard to know right now how everything will shake up. ”

Right now, Darby said, it appears that airlines are trying to cut their pilot lists from both top and bottom. Because they are represented by the union and progress through their careers primarily based on seniority, and because their pay rates increase with the size of the planes they fly, high-ranking pilots are the highest-paying . So it makes sense for airlines to cut as much as possible to save money.

“But why would you pay a boy almost $ 1 million to leave? That’s not saving money, ”asks Darby rhetorically.

The reason, he says, is that whatever it costs to pay a senior captain to leave early, the airline’s training costs related to covering former pilots’ duties are even higher.

When a senior captain retires, he triggers a series of promotions further down the seniority ranks. And each promotion generally requires two to four weeks of recycling. Medium aircraft captains have to be trained to fly in larger aircraft. Then even smaller aircraft captains have to retrain to fly medium-sized aircraft. Then, first officers on large planes have to be retrained as a captain on small planes. And first officers on smaller planes have to be retrained as first officers on larger planes. In years spent at large airlines operating multiple types and sizes of aircraft, it was not uncommon for a single pilot retirement to trigger seven or eight pilot retraining sequences as younger pilots successively progressed through the scale. professional. Taken together, all of that additional training could cost airlines between $ 1 million and $ 3 million when simulator time, instructor and training technician salaries, plus additional pilot salaries needed to fly planes while others are in training are included in the equation.

Thus, by convincing high-ranking captains to leave early, and simultaneously firing the youngest and lowest-paid first officers, airlines can “stabilize half of their [pilot seniority] ready, “says Darby.

“Combine that cut from the top and bottom of the list with the reduction in the number of different types of aircraft carriers have been operating since Covid arrived, and you’ve created a situation where the departure of top pilots triggers far fewer events. pilot training.

“That’s one of Southwest’s secrets to saving costs, and on many of the smaller airlines like Alaska, JetBlue and Frontier that only fly one type of plane, or maybe two at most,” he adds. “Everyone is trained to fly on the same plane, so there is much less need to retrain when there is a retirement.”

All of that costly training required when pilots retire partly explains why early retirement offers recently made to them are significantly more lucrative than early offers made by some carriers to their other employees. Of course, pilots are also the highest-paid non-executive employees due to the years and the enormous amounts of money they spend to gain the experience and credentials necessary to be hired in the first place. Furthermore, before the pandemic hit earlier this year, US carriers had to do everything they could to find and hire enough new pilots to replace retirees and fulfill their growth plans. Airline leaders had been concerned for years about what was, until recently, a severe shortage of qualified pilots.

One of the most interesting things to keep in mind in the coming months as airlines begin laying off workers on or before October 1, when the Congressional freeze on layoffs falls, will be to what extent, if any , airlines will be willing to carry more pilots than they really need on their payrolls. Darby said he suspects that carriers may be willing to carry many more pilots than their operations will support this fall. This is because, he says, the cost of retraining the remaining pilots to take on the jobs performed by the fired pilots, and then the cost of retraining not only those same pilots again but also the fired pilots once they are called back to work.

“If you think you will need to retire the pilots in three to six months from the time you fire them, it is probably cheaper to just keep paying them instead of paying for all that extra training,” he says. “It will be interesting to see how each operator handles that problem.

“It will tell us a lot about how much demand is coming back or not and how they see demand picking up in the next six months to a year, or even the next two years.”