Mar 08, 2022

In a previous article “The Pilot Shortage - A Challenge for Airlines, Possible Boom for Flight Schools” we talked about airlines creating their own academies in order to deal with the pilot shortage. We stated that Airlines may seek to create their own pilot training academies, either wholly owned or in partnership with a reputable flight school(s). In recent years American Airlines through its American Airlines Cadet Academy has done the latter. While Lufthansa is known for having its own pilot training academy. Here we also predicted that more airlines would start adding primary flight training  academies to their overall business model. Recently United Airlines officially launched its Aviate Academy ,which confirms our ideas on this very point.

In this short article, we will take a quick look at what will become somewhat of a trend for the major airlines, and that is starting their own flight academies. How this may benefit the airlines in the medium to long term, As well as what this may be for the overall aviation space. Particularly we will be talking a little bit about the traditional flight schools and what this means for them.

Key Takeaways

1. A second major airline officially launched its pilot training academy.
2. There are pros and cons for airlines starting pilot training academies.
3. Flight schools may worry about the attic competition From airline pilot training academies, yet this worry may be unfounded.

Airline Academies

Airline academies are nothing new. Over the decades airlines have always opted to create their own academies. In fact, many of the European airlines kept this practice up Over the decades with Lufthansa being one of the more prominent ones. It makes sense that the Europeans and the Chinese who seek to set up their own training program for primary Flight Training as they do not have a well oiled general aviation segment of their aviation industry. It makes sense for Airlines in the United States to leverage the general aviation segment here in the United States to provide those primary training. While at the same time it makes sense to the Europeans and Chinese to figure out ways through their own ingenuity to train their pilots for their respective airline industries.

Recently, airlines in the United States have been picking up the practice of creating academies. A couple of years ago American Airlines created its academy. While the model for the American Airlines Cabinet Academy is different than that of the United Airlines Aviate Academy The rationale behind Both moves are the same. The rational was a response to the pilot shortage.American Airlines chose to leverage the experience and historical training capabilities of capable flight schools to provide for its current program. United chose to build out the very first wholly-owned cadets program in the United States in decades. This required that United front all of the costs necessary to create the program and to run the business and business structure which is the enabling factor for the program itself.

The Positive Implication

Whether in theory or in practice, there are some positive implications from airlines creating their wholly-owned  and operated pilot training academies. A few of these are discussed below.

1. Brand leverage – Airline academies are a great way for airlines to extend their branding, Leveraging massive Brand power into areas that could be beneficial as it moves forward to create a smooth pipeline of pilots.
2. Prestige – There is some added prestige and opulence to going to an airline academy. Newly minted student Pilots could find going to an airline Academy to be quite prestigious. After all,this is not attending some run-of-the-mill flight school at the local airport. This could add some weight to the Academy which also links back to leveraging a strong airline brand.
3. Pilot pipeline – at least in theory, by having a dedicated and a wholly owned pilot training academy an airline can guarantee a pipeline of pilots coming through the ranks to fill its demand for pilots. This may also lend itself to greater control over the training process and align it more towards what is expected in the airlines. 
4. Overall industry benefit – Airline academies are great ways to create a buzz around the pilot training segment that may attract new pilots into the space even if they’re not going to an academy. This ultimately benefits the entire aviation industry, and in particular the pilot training space.

What’s Not Readily Seen

While the intentions for creating wholly-owned pilot training academies are good and Noble, there are still some things that are not readily seen with this move. Let’s review a couple of these below.

1. Brand ambiguity – While it is powerful to leverage a brand such as American Airlines or United in the area of primary pilot training, it could also create some sort of ambiguity around the branding of the airlines itself. No doubt people will find a lot of positive cloud surrounding a flight school that is operated by United Airlines or in an extended way by American Airlines. From a strategic perspective however, this is also saying that United Airlines is engaging in primary training and from an overarching viewpoint this could be seen as watering down the product, particularly when looked at from a securities analyst perspective when it comes to the companies public stock portfolio analysis. That being said, the general public, particularly new pilot candidates, may not care about this ambiguity.
2. Just like a flight school – Airline academies operate primarily like flight schools. It could be misunderstood that once you have completed your training at an airline academy, one will go right into the majors and start flying. This is not necessarily so, successful cadets would still have to pass through the ranks of the regional airlines that are affiliated with the airlines on the way to a career in the respective major airline.
3. Not like a flight school – While in many ways the airline academies operate primarily like a flight school, there are certain things that make them not like a flight school. Flight schools have the advantage of providing primary flight training for some cases well over three decades. While the airlines are very adept at providing higher level training for their pilots it is not the same in training a newly minted student pilot. Therefore, the experience here lies with flight schools.
4. Financial implications – Just like with the flight schools the aspiring pilot will still have to pay their way through an airline Academy. Unlike in China where the airline training is practically a part of a career training. This means that the pilots in the Chinese airlines are hired before they even become pilots. And therefore all of their education and training is all a part of their job. They’re getting paid because they are already hired. Here in the US airline academies, students will need to foot the bill for their training and they are not hired with the airline in the sense that a Chinese airline pilot cadet would be. 
5. Ubiquitous partnerships – Partnerships between flight schools and regional airlines are so ubiquitous that every flight school that starts can claim that they have a partnership with some regional airline. These are the very regional airlines that are associated with airlines that have their own flight academy. Given this far, it is still yet to be seen whether or not a student will benefit more from going to an airline Academy given the possible added cost associated with that or just going to their local flight school that is still associated with a regional airline that itself is associated with a major airline. 

While it is clear that there are some good intentions and some not so easily seen implications that may arise from airlines creating their wholly-owned pilot training academies, one thing is for sure, only time will tell whether or not these approaches are able to affect the kind of results that airlines are expecting.

How Might  Flight Schools Respond

Given all of this development, one might ask how flight schools should respond to all of this. The short answer is: Do nothing. In essence flight school should keep doing what they’re doing. The reason for this advice is as follows.

1. Flight schools are more experienced - While airlines are quite experienced in running the airline business model, I’ll be at sometime quite ineffectively and at a loss. In fact the only airline in US history to make a profit every year is Southwest Airlines. Most of the time the average airlines make losses. With that being said airlines have not spent decades dealing with the very volatile and tumultuous space of pilot training. One might think that it is a simple matter of bringing large resources to bear on buying brand new training aircrafts and doing very good press releases that would lead to success in primary flight training in the space. Unfortunately, this is not so. The pilot training space is one that is unique and one that is highly fragmented. In fact, it is nothing Like the airline space. It is the complete opposite. Therefore, the best entity to handle the pilot training space are pilot training institutions that have been doing it for decades.
2. There’s enough demand to go around - Flight schools should not worry too much about airline academies starting up as there is enough demand to go around. Neither United, nor American Airlines will single-handedly solve the pilot shortage with their academies. In fact, even if every single major airline in this country starts an academy, it will still not be enough to stop the pilot shortage Juggernaut. As stated above, it is the flight  schools that have been operating in the pilot training segment for many decades that are most adept at dealing with the unique characteristics of the pilot training segment, and with them lay the advantage.
3. Less public scrutiny - Virtually all flight schools in this country are privately held entities. The point here is that while airlines are publicly held entities and must report to shareholders and even the federal government, individual flight schools do not have this level of scrutiny. This is not to say that they can do whatever they want, but what this means is that every action of theirs is not monitored by the public who hold shares in their company, large hedge funds, or various government entities that have a vested interest outside of simple regulatory oversight.

In sum, while many flight schools might find that airline academies moving into the pilot training space to be a threat, it is not so much a threat as one might originally think. The simple truth is that it is with the vast number of flight schools that outnumber the current airline academies by 1050:1 that the try advantage lay with. Furthermore, it is the personal belief of this author that the partnership model set up by American Airlines may prove to be the most advantageous form of the current types of airline academies.

In this short article we touch briefly on some of the main positive and not so positive implications for airlines starting their own pilot training academies. There are many reasons why airlines would want to start their own pilot training academy and some of the strongest reasons may not even be what is publicly stated. Public sentiment is very important to a publicly traded company like an airline. Setting up a pilot training academy showing to the investors that something is being done about the pilot shortage is a great way to boost confidence in shareholders. Another thing to note here, is that there are two approaches to airline academies being set up so far. One is how American Airlines did it with  more of a partnership with reputable flight schools to provide its training. While on the other hand there is United Airlines that built out a wholly-owned and operated institution. Only time will tell if all the airlines such as Southwest and Delta,  along with other players such as Jetblue, and Spirit will join in. On the other hand, maybe they are just waiting to see how this plays out for the first movers. As we know, the first movers don't have the advantage.

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