Pilot wage boom faces uncertainty amid shifting airline economics

When American Airlines paused pilot hiring in June, it joined Delta, United, and Southwest in slowing or stopping pilot recruitment entirely. This move alleviated pressure on regional airlines where the pilot shortage was most acute. Major airlines had been hiring away from smaller carriers at top wages.

Recently, however, airlines have reported excess capacity during their earnings calls. Many grew faster than passenger demand without even factoring in a recession or expected levels of new aircraft deliveries. Boeing's inability to deliver aircraft unexpectedly helped airlines facing squeezed profit margins due to competitive airfares.

Ultra-low-cost carriers like Spirit and Frontier have particularly struggled because rising wages since the pandemic have eroded their cost advantages. United CEO Scott Kirby suggested that Spirit might not survive after the Biden administration blocked its acquisition by JetBlue.

Without an ongoing pilot shortage, wages may no longer rise continuously. Enilria reports that many JetBlue pilots believe wage concessions are imminent amid the carrier’s financial troubles. Comments on message boards include:

• “(pay) concessions are coming”

• “(concessions) are inevitable”

• “it’s just a matter of when; days…months”

• “a bankruptcy judge will do it (if we don’t)”

• “hold off on big financial moves”

JetBlue has an open pilot contract and is struggling compared to its industry peers. It is not positioned to push up costs further. Other carriers also appear poised to hold the line on wages based on discussions within pilot forums.

Senior pilots at various airlines must adhere strictly to company rules as moving them off payroll offers significant financial benefits due to their higher salaries. For instance, Sun Country reported that a single pilot earned $750,000 at the top end while over $500,000 is common at major carriers.

Economic downturns could further reduce demand for pilots. In future scenarios involving AI improvements and AI co-pilots potentially being safer than human ones, union calls for two pilots per cockpit may become outdated.

Short-term risks suggest securing favorable deals now could be prudent as economic conditions shift and airline balance sheets weaken. American Airlines’ flight attendants union recently secured what might be its best possible agreement under current circumstances despite some internal disagreements over priorities.

American Airlines' mechanics ratified a record five-year contract right before the pandemic started; subsequent negotiations likely would not have yielded such favorable terms given changing conditions.