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What Are Airlines Doing to Solve Pilot Shortage?


Nov. 23 2016, Updated 1:04 p.m. ET

Issues concerning labor

There are a host of issues that have been concerning the nation’s labor workforce from longer working hours, contentious relations with management, and fewer job protections. However, the prime issue that has led to a crisis in regional airlines is that the regional players pay much less than their legacy peers even when the regional sector accounts for half or more of all flying. These regional carriers are also important since they feed the legacy carriers with customers on their networks.

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Airlines bringing industry pay on par

Most airlines including Delta Air Lines (DAL), Southwest Airlines (LUV), United Continental (UAL), and American Airlines (AAL) have recently renegotiated contracts with both pilots and other contract workers. As per the contracts, the pilots will receive a good pay raise over the next two years followed by decent pay increases for two to three years thereafter. This means labor peace for airlines at least for the next few years. This is good news for both parties, especially for airlines like Southwest Airlines that have been struggling to reach an agreement with pilots for the past four years.

Addressing pilot shortage

As many as 30,000 pilots will reach the mandatory retirement age of 65 years by 2026. According to a study by North Dakota University, if there aren’t sufficient new hires to replace them, airlines could face a pilot shortage in perhaps three years. In the next ten years, by 2026, the pilot shortage could be as high as 15,000.

While the shortage issue is not completely tackled yet, some airlines like American Airlines are trying to solve the problem by increasing the pay for fresh pilots, thus making pilot training costs viable.

Investors can gain exposure to travel stocks by investing in the iShares Transportation Average ETF (IYT), which invests 22% of its portfolio in airlines.


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