Dec 17, 2021

As discussed in a previous On Aviation™ article, there are a number of generally accepted reasons for the current pilot shortage. Reasons range from the 1500 hours requirement for first officers enforced by the Federal aviation administration (FAA), early retirement practices by airlines, and the effects of the pandemic. In this article, We will discuss the hypothetical situation that the FAA decided to take action on helping to alleviate the pilot shortage by strengthening or relaxing regulations. We will take a look at what the implications of this action would be, and how it will affect the two main stakeholders in the industry, namely, the airlines and flight schools.

Key takeaways

1. What would a hypothetical response from the FAA in reducing the hours for first officers from 1500 to 500 hours look like?
2. Possible outcomes for the industry in general of such an action by the FAA.
3. How would this action by the FAA affect the airlines?
4. How would this action by the FAA affect flight schools in pilot training institutions? 

A Hypothetical FAA response

Let us say we took a hypothetical trip to “Regulation Land”, and took a look into some of the possibilities of an FAA response to the pilot shortage. What if the FAA in all its wisdom and awesome powers, saw the current pilot shortage as a serious problem for the entire aviation industry. A problem that has such wide-reaching negative social and economic effects that they decided to take action to help alleviate the problem. Let us also say that the action they have chosen to take is to lower the hour requirement for first officers flying real passengers in the airlines under 14 CFR Part 121. If the FAA decided to reduce the hour requirement from 1500 hours to 500 hours. One might think that this is a dramatic change, but remember that the opposite change happened over 10 years ago when it moved from 250 hours to 1500 hours. In any event, if this is the action they chose to take, what would this mean for the Aviation industry, in particular the airlines and pilot training institutions? Would this help to alleviate the pilot shortage? Would this exacerbate the pilot shortage? Or, would it have no effect on the pilot shortage in general?

In the remainder of this article, we will discuss these questions in detail as they relate to our hypothetical trip to “Regulation Land”.

What the experts think

Most industry experts believe that the FAA deciding to reduce the hour requirement would be more of a problem than a benefit. It will inadvertently spike demand even further, causing even a greater shortage not only on the airline side but also on the pilot training side. Depleting the instructor pool which reduces the number of instructors available to train new pilots, which ultimately feeds back into the available pool of pilots for the airlines. 

Rod Machado -businessman, long-time flight instructor, writer, and industry expert -  was on FOX Business with John Stossel in 2016 when the pilot shortage scare was in its “early days”. When asked, what should we (the FAA and other regulatory bodies) do about it?. Rod’s response was clear and precise. “Nothing”, he stated aptly. According to Rod Machado and other industry experts, the free market has a wonderful way of correcting itself. That is if there is a pilot shortage then new schools will pop up to fill the demand for training which then feedback in more pilots being in the industry itself. Once the demand is met then an equilibrium point will be reached, and there will be neither a shortage nor a surplus of pilots. The factors that lead to the resolution of the shortage will also resolve themselves back to an equilibrium state.

The experts are actually concerned that action from the FAA is more likely than not. Even though they believe that this action would not bode well for the industry in general. This view held by the experts is understandable because the FAA in 2013 increased the hour requirement for first officers flying in the airlines from 250 hours to 1500 hours, which was triggered in part by the crash of Colgan Air Flight 3407 on February 12, 2009, in Clarence Center, New York. 

Possible outcomes of reduced hour requirement

Below are a couple of general short-term and long-term outcomes as a result of the hypothetical decrease of the hour requirement for first officers in the airlines.

In the short term the following outcomes would be possibilities:

1. A Large pool of current instructors, who would have been waiting for their hour requirement to get to the airlines, will take the opportunity to go to the Airlines right away since they would have now met the requirements of the lowered hours. 
2. There would be a short-term increase in airlines’ pilot pool, which might even lead to a slight surplus.
3. There would be a short to medium-term decrease in the flight schools’ Instructor pool. 

Some of the general long-term possible outcomes would be:

1. Much like with the last change in the hour requirement there will be an equilibrium point at which the change itself is no longer the driving factor in either pilot shortage or pilot surplus in any segment of the aviation industry. 
2. Once the hours are not being constantly changed up or down there will be a point of equilibrium at which the fact of a change itself is quite negligible. Synonymous with the effect of the last change that was made in 2013 on today’s pilot shortage.

How could this change affect the airlines?

Airlines could find that in the short to medium term their pilot pool increase which then would cause them to withdraw the special incentives they had during the pilot shortage to attract new pilots. They may also get an opportunity to modify the pilot employment agreements and compensation packages to their advantage.

In the short to medium term, they would seek to take advantage of any increased demand for air travel as they would have greater control over the largest component of their cost structure. Namely, pilot compensation packages.

Airlines that were not particularly forward-looking may also seek to reduce or place less emphasis on any partnerships that were created with pilot training institutions, or pilot training academies that they might have created, or intended to create. 

In the long term as the system equalizes itself, there will be a point of equilibrium for which there is neither an excessive shortage nor surplus of pilots. This will gradually over time reset itself to the most dominant factors in the industry. Particularly that air travel is increasing and the demand for pilots will also be increasing. Therefore, over time airlines may find it difficult once again to maintain an adequate number of pilots on staff, relative to the demand for those pilots.

How could this change affect flight schools and pilot training institutions?

In the short to medium term, the most prominent effect of the hours change on flight schools would be a significant reduction in the number of instructors available to train new pilots, as they would be heading off to the airlines earlier due to the lowered hour requirement. This will invariably Have a knock-on effect on the number of pilots that could be trained by flight schools.

A shortage of instructors would lead flight schools to be unable to meet the demand for pilot training, which in itself will slow the output of pilots that are needed for the industry. This in itself acts as a counterbalance to the hour requirement change, helping to push the system back into equilibrium. 

In the short to medium term, some flight schools that were not properly entrenched in the training space would be pushed out of business. This also goes for many of the smaller players that would’ve entered the market because of a shortage of pilots and a boom in the demand for pilot training. As the ability to train becomes more and more constrained, these players will invariably be pushed out of the pilot training space, which also contributes to the recalibration of the entire system.

How should flight schools respond if this should happen?

There is not much a flight school or any other institution can do in the face of powerful regulations. However, there are a few things that can lessen the effect of those regulations as they wait for the system to re-calibrate itself back to equilibrium.

1. Create deeper relationships with flight instructors and staff. By creating deep, meaningful, and long-lasting relationships with flight instructors and staff, flight schools and pilot training institutions can ensure that even with a higher demand for flight instructors’ services elsewhere, they will have built up a strong loyalty base with these individuals, which makes it more likely that they would stick with the current flight school. 
2. Find ways to reduce cost as the number of pilots being trained reduces. This is not as straightforward as above. Flight schools can use total flight school management systems to manage their entire business, helping them lower costs overall. Yet, part of the challenge is that the problem is somewhat unique to what flight schools would have experienced in the past on a widespread scale. In this case, it is not a lack of business (pilots to train), but a reduction in the capabilities for providing that service. Here’s where a little bit of creativity may be needed. For example, flight schools could use management systems as mentioned above, along with Business Process Reengineering (BPR) to get the very best out of their reduced capabilities as they would’ve currently stood.

While it is clear that everything we’ve mentioned above is in “the hypothetical”, it is also clear that it is a distinct possibility that the FAA could take the action laid out in this article. Now, if that is a possibility then the prudent airline and flight school would look at this hypothetical and ask themselves, “what action would we need to take to remain competitive and viable if the FAA should take this action?”. So, while this article was primarily a thought experiment, It is a hypothesis that we might have to test in the real world someday soon. 

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