The Airline Industry: A Primer
Introduction
Utilizing a financial grouping system, the United States Department of Transportation (US DOT)1 defines a major carrier or major airline carrier as a United States-based airline that posts more than $1 billion in revenue during a specific fiscal year. Group III airlines include: Alaska Airlines, Allegiant Air, American Airlines, Atlas Air, Delta Air Lines, Envoy Air (AAG), FedEx Express, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, Kalitta Air, Polar Air Cargo, Republic Airways, SkyWest Airlines, Southwest Airlines, Spirit Airlines, United Airlines, and UPS Airlines.
The next status is Group II airlines, which posts between $100 million to $1 billion in revenue. These airlines include: Airborne Express, Air Transport International, Aloha Air Cargo, Amerijet, Elite Airways, Endeavor, Go Jet, Horizon Air, Lynden Air Cargo, Mesa Airlines, Miami Air International, National Airlines, Omni Air Express, PSA (AAG), SkyLease, Southern Air, Sun Country, Swift Air, USA Jet, and Western Global.
Finally, there are Group I airlines that make less than $100 million in revenue a year. These include: Asia Pacific, Avjet, Eastern Airlines, Gulf & Caribbean Cargo, Jet Aviation Flight Services, Northern Air Cargo, Transair, Silver Air, Everts Air, and World Atlantic.
There is also a subgroup of this category for carriers making less than $20 million a year including 21 Air, Ameristar Air Cargo, Hillwood, Kaiser, Polaris, Prescott, Sierra Pacific Airlines, and Xtra. For more information as well as a complete list of FAA Part 121 certificated air carriers though, review the US DOT’s Certificated Air Carriers List and the US Bureau of Transportation Statistics at their respective websites.
Note: Some might have noticed that Air Wisconsin does not appear in any of these lists. This is because Air Wisconsin is a privately held corporation and does not release financial information. They are, however, a Part 121 certificated airline.
Moreover, the airline industry itself is an oligopoly, with just a few airlines actually controlling the industry, and all carriers producing essentially the same or mildly differentiated products. Although the majors possess larger operations, aircraft, and networks, the bottom line is that the base product itself and for all airlines remains the aircraft seat and/or cargo space as a function of movement by air from point A to B.
For colloquial purposes, we will breakdown the more formal US DOT system into the way that the industry more closely delineates and views itself.
The Passenger Major or “Mainline” Carriers
Mainline, or major network carriers, include those full-service airlines that usually have multiple hubs and provide service to most, if not all, of the 50 United States as well as international destinations. These carriers typically have higher fares (ticket prices) that may include baggage, food and other costs. Market share for these
1 U.S. Department of Transportation. (2020). The U.S. Department of Transportation Family of Sites. Retrieved From: https://www.transportation.gov/
carriers is about 14% -20% per airline of the total industry. Carriers in this upper tier of the passenger airline industry include United, Delta, and American. These airlines are also referred to as flag carriers, stemming from the regulations requiring aircraft flying internationally to display the flag of country of registry.
At the time of writing, American is currently the largest US airline by aircraft count of the legacy carriers – Alaska, American, Delta, Hawaiian, and United. The term legacy identifies carriers that were formed prior to the Airline Deregulation Act (1978), which removed federal government control over such areas as fares, routes, and market entry of new airlines. These legacy carriers have managed to survive into the modern airline era, though each is an amalgam of multiple airline mergers and acquisitions over time.
Most recently, the three mainline carriers have survived by merging with other large carriers, reducing competition, expanding market share, and creating economies of scale. Delta led the large carrier merger wave in 2008 by combining with Northwest Airlines, while United and Continental followed suit a couple of years later in 2010. American and US Airways were the last of the legacy mainline carriers to combine in 2013. Although the employee groups and operating procedures at these carriers have largely been fully integrated, some residual cultural differences from pre-merger operations might still linger.
National
Low Cost Carriers (LCC) Ultra Low Cost Carriers (ULCC)
The terms national or low cost carrier (LCC) refers to those carriers focused on providing less expensive, a la carte and no-frills flights to some states in the US, often utilizing a single fleet type to further reduce airfares and eliminate unnecessary costs. Total domestic market share for these carriers is about 1% -5% per airline, with Southwest being the exception to this group holding 17% of total US airline market share based on Revenue Passenger Miles (RPM)2. Neither a mainline nor a true low cost carrier (LCC), the national airline group includes Alaska, Hawaiian, and JetBlue. Although these carriers may be generically associated with the LCCs from time to time, they each have unique brand signatures and dedicated passenger followings. Furthermore, the flying these carriers do is more reminiscent of mainline operations, not only from a route system perspective, but from a product offering one as well.
Alaska, for example, is the sixth largest airline in the US when measured by fleet size3, destinations and passengers enplaned, with a route network including the Pacific Northwest and Canada, destinations to most states including Hawaii, as well as Mexico and Costa Rica. Although not a member of any of the three major airline alliances yet (membership in OneWorld is pending as of early 2021), Alaska maintains codeshare agreements with seventeen airlines and partners with regional carriers Horizon Air and SkyWest for shorter domestic flights.
Hawaiian Airlines, based in Honolulu, Hawaii and in business for over ninety years, operates flights to Asia, American Samoa, Australia, French Polynesia, New Zealand, and the US mainland utilizing a mixed medium and long-haul fleet of B717s, B767s, and A330s, offering first and business class options for passengers as well.
A modern staple of air travel in the New York market, JetBlue has made an impact since its operational start in 2000, conducting over 1,000 flights daily and serving over a hundred domestic and international destinations in the US, Mexico, Caribbean and Central America, along with South America. Although founded on Southwest’s low cost model, it stands apart in this sector by offering premium class service as well as upgraded amenities including seatback TV and satellite radio.
2 Bureau of Transportation Statistics. (2020). The U.S. Bureau of Transportation Statistics Family of Sites. Retrieved From: https://www.bts.gov/topics/airlines-and- airports-0
3 Airfleets.net. (2020). Airfleets.net Family of Sites. Retrieved From: https://www.airfleets.net/recherche/list-country-USA_40.htm
Airlines distinctly in the LCC category include Allegiant, Frontier, Spirit, Southwest, and Sun Country. Over the last twenty years, the growth of the LCC sector has been instrumental to expanding the aviation industry domestically as well as abroad. All of these carriers share the LCC business model, predicated on high seating density and aircraft utilization, coupled to low fares and pay-as-you-go services including items such as checked bags and boarding priority. With specific regard to Spirit Airlines, the CEO of this ultra-low cost carrier (ULCC) bills the airline as the “Wal-Mart” of the skies. Yet, they boast a strong passenger base for customers seeking the least expensive ticket they can find, traveling to mostly vacation-style destinations, while accepting that they must pay for every service they subsequently opt for such as checking a bag, bringing a carry-on, purchasing a soda, snacks, wifi, etc.
Southwest has of course set the standard for the low cost business model focusing on flying a single fleet type of Boeing 737s, a streamlined boarding process, quick turnaround times for deplaning, boarding, and departing; as well as flying often to secondary market airports, e.g. Dallas Love instead of Dallas-Fort Worth; and Houston Hobby instead of Houston Intercontinental. However, despite pioneering the contemporary low cost model, based on their size (revenue and reach), they are considered a national carrier.
Regionals: Formerly Known as the “Commuters”
Twenty years ago, regional carriers only served specific geographic areas or regions within the US, usually smaller communities that were under-served by larger mainline or national carriers. But in the years since 9/11, regional carriers have moved from flying primarily turboprop airplanes to modern jets in 50 to 100 seat capacities. They now constitute nearly half of the domestic lift (takeoffs and landings) in the industry, flying throughout the US. Even though considered domestic operations, regional carriers also fly in Canada, Mexico and even to Cuba.
How do regionals work?
Few of these carriers operate or conduct business under their own independent brand. They are usually contracted by major airlines to fly as an express operator under that designated mainline’s brand. The way this subcontracting works is that the regional carrier enters into a contractual agreement with a large, typically mainline carrier. The mainline carrier signs a Capacity Purchase Agreement (CPA) with the regional provider, in effect purchasing the aircraft seats (capacity) of the regional partner, then selling them as their own.
The regional management group provides the flight and cabin crews; aircraft, maintenance and mechanics, and the general management structure. The mainline partner takes care of the rest: pricing structure, routing, sales, marketing, branding, etc. Sometimes the mainline carriers will purchase or lease aircraft and require their regional partners to operate them, such as in a Jet Services Agreement (JSA).
Although some regional carriers only fly for a single mainline carrier, some fly for more than one. For example, Air Wisconsin and CommutAir only have a contract with United and therefore fly exclusively for United. Whereas, Republic Airlines and SkyWest Airlines have flying contracts with American, Delta, and United. Alaska is unique in the national airline category in that they are the only carrier to partner with regional airlines to provide smaller market service. With partnerships that include Horizon Air and SkyWest Airlines, they have expanded their brand to markets that would otherwise not be economically viable for them to fly an Airbus 320 or Boeing 737 into.
The other structured parent carrier-regional carrier relationship is the wholly owned subsidiary category. In the past, many large carriers sought to control their regional feeder network by completely owning and directly operating the regional carrier as a subsidiary of the parent carrier. The benefits of off-book financing and the ability to play regional airline management groups against each other to reduce operational costs has generally led to the reduction of the wholly-owned relationship by the large parent carriers. However, this is still a key
factor for American Air Group (AAG), where their three regional providers, Piedmont, Envoy, and PSA, are owned completely by AAG and support American’s feeder network, transporting passengers in and out of the airline’s large hub airports.
Regardless of structure though, these arrangements are often complicated and can create stress within the regional carrier when the contract (CPA or JSA) is due to expire and the parent company is not interested in extending or renewing the contract with the regional provider. Or, in the case of the wholly owned relationship, when the parent carrier needs to reduce operations or furlough mainline pilots based on an economic downturn, this can translate into the loss of flying and pilot jobs at the regional carrier.
It is likely in the near future that consolidation which occurred in the mainline sector in the mid-20teens will repeat itself in the regional sector, meaning that if a regional contract(s) is not renewed, employees at a regional carrier may be forced to find work at another air carrier at the bottom of the seniority list. It is also likely that in the aftermath of the coronavirus pandemic, constricting mainline and national carriers may be slow to resume the outsourcing of their flying to regional partners, or may cancel contracts permanently. This cancellation has happened most recently with the closing of Compass, Trans States, and ExpressJet.
Interestingly, not all mainline-regional contracts generate huge profits for the parent company; in many cases this symbiotic relationship is more about market share for the mainline partner, and just trying to survive another year or two in the industry for the regional carrier. In these cost-plus arrangements, where the mainline parent compensates the regional partner for expenses plus a specific amount of profit, it often works out to barely more than a breakeven exchange for remaining a provider in the mainline’s route network. This is why we often find a regional carrier contracting with multiple mainline partners: to increase their efficiency and profit margin, as well as securing a degree of economic protection in the event a mainline contract is cancelled or not renewed. If a mainline carrier decides to reduce or terminate their relationship with their regional partner, it can create upheaval in the operation, including shutting down pilot bases, furloughing pilots, reduction of benefits, etc.
Flying for a regional carrier however does have some advantages for a pilot including exposure to airline operations, Federal Aviation Administration (FAA) regulations and airspace procedures, fixed-wing and ATP experience, base and living location options, quicker upgrade times to captain, as well as rapid upward movement of seniority which can provide improvements in overall quality of life for the pilot. In addition, pay rates and benefits in this area of the industry have seen significant increases and improvements in the last several years, with average starting salaries in the mid-$50,000 to $60,000s. We will review some of the pros and cons of working within each carrier sector in the next chapter.
Currently, the branded mainline-regional partnerships are:
American Eagle
Piedmont, Envoy, and PSA (each of the previous three are sometimes referred to as wholly owned, because American Air Group or AAG, owns the companies outright), SkyWest Airlines, Mesa Airlines, and Republic Airways
United Express
Air Wisconsin, CommuteAir, GoJet, Mesa Airlines, Republic Airways, and SkyWest Airlines
Delta Connection
Endeavor Air, Republic Airways, and SkyWest Airlines.
Alaska
Horizon Air, SkyWest Airlines
FedEx
Air Cargo Carriers, Ameriflight, CSA, Empire Airlines, Mountain Air Cargo, WestAir, and Wiggins Airways
UPS
Air Cargo Carriers, Ameriflight, and Wiggins Airways
Essential Air Service.
There is one other special carrier category worth mentioning before moving on to airline alliances, and this is Essential Air Service (EAS). Administered by the DOT, the EAS program was established by Congress (Section 419 to the Federal Aviation Act and amended by the Airline Deregulation Act of 1978) to ensure that smaller communities would be provided access to air carrier service, utilizing federal subsidy when necessary. Although typically served by smaller carriers operating turboprop or small jet aircraft, remote communities throughout the continental US, as well as Alaska and Hawaii, remain connected to the national air transportation system through this program. Carriers such as Boutique Air, Cape Air, Key Lime, Mokulele, Silver Airways, and even SkyWest provide air service as a part of EAS contracts.
Airline Alliances
Unlike the national carriers or LCCs, the largest of the US legacy carriers offer significant international flight routes and destinations. Each of these major airlines also partner with foreign carriers through interline agreements to connect passengers with destinations abroad that they find more economical to have their partner airline fly.
United, for example, possesses the most extensive international segments that are operated by United pilots and flight attendants. When and where required though, international connections to destinations not served directly by United are made possible for passengers by agreements with other carriers to provide flight services on routes that are not economically viable for United or are not allowed under existing international trade and travel agreements. These arrangements, often reciprocal, arrangements are referred to as interlining and code sharing, where carriers share their airline ticketing code with each other in order to sell tickets for given lines of travel through their own corporate marketing systems.
Although Delta flies international segments using Delta pilots and cabin crews, the majority of their branded international flying is accomplished through code sharing via joint venture arrangements with foreign carriers.
As well, American collaborates with 12 other global air carriers (pre COVID-19), further utilizing 30 affiliate carriers, in order to expand the total network available to not only passengers, but the financial bottom line of the air carriers themselves. That’s over 3,000 aircraft, to more than 1,000 destinations in nearly 168 countries. Alaska Ailines is also part of the One World alliance as of March, 2021.
These arrangements form the backbone of an airline alliance system, a group of carriers utilizing exclusive interline and codeshare agreements in order to capture global market share. Ultimately, though, this system allows carriers big and small around the world to access global markets that they otherwise would not have the operational or economic capability to reach.
Because of the economic potential, these codeshare agreements are extensively codified in the respective (and also heavily branded and promoted) alliance system. The three global alliances are Star Alliance, headed by United; Sky Team by Delta; and One World by American. Look for specially painted aircraft that promote each alliance.
The ensuing codeshare flights are identified by each airline with their own flight number, for example: United flight 9458 Denver to Munich (DEN-MUC) is actually operated by Lufthansa, but will be listed as LH481 and
UA9458, respectively and at the same time at the departure gate as well as on the passenger’s ticket. Even US domestic flights flown by regional carriers for their mainline or parent carrier utilize the codeshare system in order to brand and market the regional carrier’s flight as one flown under the umbrella of the mainline network.
Let’s take a little closer look at the pivotal code sharing process.
Codeshare Agreements
Codeshare agreements came into fashion in the 1990s. It allows airlines (both domestic and foreign) to partner on important routes. These partnerships can consist of buying a block of seats on another carrier or simply selling seats on their codeshare partner, or both agreements can occur simultaneously. The benefits of these codeshare agreements are numerous for the airlines. For example, airline XYZ does not fly to Africa but airline ABC does and code sharing will allow passengers to seamlessly connect through ABC and XYZ hubs; complete with allowing frequent flyer benefits, lounge access, and ticket booking.
For example, Delta codeshares with KLM. Some city pairs are flown by KLM and some are flown by Delta. Some city pairs have flights operated by both carriers but at different times of the day and different aircraft type. When a person searches on a Delta website or app for a city pair, let’s say Orlando (MCO) - Copenhagen (CPH), the booking could show DL410 MCO - Amsterdam (AMS) and DL9536 AMS - CPH, but flight DL9536 is actually operated by KLM. When you go on KLM website, it shows that same flight with flight number KL1131.
Regional Carrier Codeshare
Code sharing is also commonly done with regional flights in combination with international codeshare agreements. In this case, SkyWest Airlines operates a flight from Chicago (ORD) to Wichita (ICT) under an agreement with United Airlines as UA5663. However, through various international codeshare agreements between United Airlines and their Star Alliance Partners, it also operates as AC3467, NH7616, and NZ2459.
The biggest advantage for airlines such as American, Delta, United, and Alaska is the fact that these codeshare flights show up in a search under their own brand, even when a given flight is not being flown by the carrier directly as indicated in online search engines or on the passenger’s ticket. Often, this leads to the customer not even realizing they are traveling on a different airline, until they board the aircraft. The notification is usually in very small print as you can see with the Delta / KLM example.
Another advantage of code sharing is economy of scale. Usually, airlines want to be the biggest player in their hubs (“fortress hubs”). By using these codeshare agreements, it increases the size of the hub, significantly allowing more passengers to stream through the hub. This in turn allows more connecting flights to be added which increases the size and efficiency of the hub.
Cargo Carriers
As the name implies, cargo carriers or cargo airlines principally focus on moving goods within the country and around the world. At the present rate, they move about 63 million tons of cargo each year; although this represents less than 1% of world trade by volume, it accounts for over 35% of world trade by value, exceeding
$6.2 trillion in 2019, and representing more than 7.5% of world Gross Domestic Product (GDP) and growing every year4.
Although some air cargo carriers engage in combination operations (moving boxes as well as people as a part of charter or courier services), these carriers are predominantly engaged in the efficient and economic movement of non-human cargo.
4 U.S. Department of Transportation. (2020). The U.S. Department of Transportation Family of Sites. Retrieved From: https://www.transportation.gov
Some of the largest US cargo carriers are UPS, FedEx, Atlas Air World Wide Holdings (Atlas Air, Polar Air Cargo, and Southern Air), Kalitta Air, and Air Transport Service Group: (ATI, ABX Air, and Omni Air). These carriers also utilize hub systems – a central operational base (often referred to as a sort facility or sort) where multiple flights are routed in and out of and where cargo is centrally loaded and unloaded, either onto other aircraft or onto trucks for terrestrial distribution. These include locations such as Louisville, Kentucky for UPS, and Memphis, Tennessee for FedEx.
Although the underpinning concept for passenger operations is the desire of a person to travel from point A to point B (based first on available destination and then largely on ticket price thereafter) with a selected airline to provide that service, options for choosing air cargo transport have a few more customer considerations. These include the following, with delivery time often being the primary consideration: perishable items or those at risk of pilferage, breakage, or rapid deterioration; products subject to quick obsolescence or requiring special packaging or handling expertise; and anything of course required on short notice - dedicated cargo companies have the knowledge to deal effectively with these issues, such as transporting race horses for example.
Because of the unique operational profile of the cargo carriers (likely recognizable to those of you who have already flown freight or perhaps flew a tanker, the Herc, C-17, or similar support mission), many of these flights and trip sequences can be long, with numerous time zone changes, combinations of late and early departures, short layovers, challenging airports and routes. This type of flying therefore can be quite naturally fatiguing. Having said that though, cargo airline schedules in and of themselves are not dissimilar to passenger airline schedules. However, it is not unusual for a cargo pilot to be gone 15 days and travel around the world and back, which is not a common passenger airline profile.
If you prefer the late nights and long duty periods, cargo flying can offer some of the most interesting experiences in commercial aviation. In addition, depending on the size of the company, senior pilot retirement rates, fleet types, and number of bases, cargo carriers might provide a faster upgrade to captain as compared to the more traditional passenger airlines. Moreover, many of the cargo carriers, especially FedEx and UPS, offer exceptional pay and benefits. It’s also a common refrain in the cargo world that “boxes don’t complain.” This is true in that unlike the passenger airlines, cargo pilots do not have to deal with irate passengers; they also do not have to worry about cabin crew (flight attendants), and interface with gate agents, and largely avoid other general passenger-side airport hassles such as long walks to the gate, congested security, and similar inconvenience factors. Some cargo carriers utilize a home basing, out-basing, or gateway system for pilots travelling to and from home and work assignments. This essentially means you can stay at home (wherever that may be) until the carrier needs you to fly. Then, they purchase a ticket on a commercial flight for you to get to base or a location they need you to be in to pick up an aircraft and flight assignment. If you will be in a location waiting on an aircraft or flight assignment to begin, they will provide you with hotel accommodations. This arrangement effectively eliminates the need to commute and maintain an in-base crashpad (more on this in chapter 4). Some pilots enjoy this nomadic lifestyle and manage their schedule in a way that all but relieves them of even having to maintain a permanent residence.
It is also worth pointing out that the cargo sector has not been dramatically affected by the coronavirus, or at least in a negative way. In fact, with the passenger carriers pulling down flight schedules and not transporting “belly freight” (cargo transported along with passenger baggage in airliners), the cargo industry has actually had more work than they can handle. Consumers have been shipping and receiving more due to lockdown initiatives in conjunction with the transport of medical and protective equipment being manufactured and shipped across the globe, all expanding work and profits for these operators. This increased demand for cargo may also be a part of the new post-coronavirus paradigm shift, creating even more flying opportunities in the cargo sector.
Types of Cargo Flying
The success of many cargo operators lies in their ability to move cargo quickly and efficiently by air during off- peak passenger travel hours, avoiding traffic congestion and delays in order to deliver on time. This naturally translates into a considerable amount of nighttime flying, which also allows the opportunity for packages to be gathered during the day and prepared for quick loading at night.
Although most cargo carriers perform extensive nighttime flying, some cargo carriers have a considerable amount of day flying as well, often scheduling daytime turns (go to a destination and come right back to home base), which can be quite desirable from a work-life balance or quality of life standpoint. However, these daylight-based tips are usually senior, meaning if you are new with the company, you will probably not be able to get those types of trips for a while (see longevity and seniority in chapter 2). Daytime flying can be less taxing on your body and therefore more desirable; and the more desirable, generally, the more senior one has to be in a company in order to “hold it.”
Mostly, cargo flying is composed of turns, where you fly between a hub or package sort facility to an outstation (non-hub city or town), and back. UPS for example has many schedules in which the pilot completes a flight to their hub (the sort facility, or sort, where packages and cargo are loaded and transferred between flights) and then sits for two to five hours before flying back. You might have an entire week of this type of flying. At FedEx, you might have a show time of 2100, fly from their sort facility in Indianapolis (IND) to Newark (EWR) departing at 2200, arriving at 2330; and sit for two hours while the plane is unloaded and reloaded. Then, fly back to Indy at 0130, arriving at 0330, returning to Newark at 0530, landing at 0700, completing your duty period and heading to the hotel to sleep for the day before showing back up at the FedEx cargo facility in Newark that night to start the same schedule in reverse. Yet, other cargo schedules may take you from Cincinnati, Ohio to Chicago, Illinois, then on to Narita, Japan. From there, off to Sydney, Australia, then Soul, South Korea, over to Hong Kong, and back to Narita before returning through Anchorage, Alaska to the US.
Also, be prepared to deadhead (a non-piloting assignment where the company provides you a ticket as a passenger) a lot and keep in mind that not all carriers provide full pay for deadheading hours; some only pay half or a portion of the deadhead time. For example, you might be scheduled to deadhead (fly commercially) from your home in Kansas City to Los Angeles to start your trip. The company books you a ticket and the deadhead flight is three hours in duration. Depending on the pilot contract or work agreement, you may get the full three hours of travel pay, or may only get paid or credited one-hour and thirty-minutes (1:30).
Additionally, night flying can be very challenging for some people. Their body clock does not adjust as well as other people and they are constantly tired. Daytime sleeping might not be ideal either: housekeeping staff and others in a hotel can often be very noisy, rooms excessively hot or cold, or not enough light is blocked by the curtains. Your circadian rhythm (the biological instinct to wake up or go to sleep) is often trying to override your desire to sleep during the day, or put you to bed in the middle of a night flight. Even trying to get quality rest at home can be problematic sometimes. Family members (especially kids) and pets might not be as quiet as desired and other neighborhood sounds and events can be disruptive. Because you are at home, pressure might exist to cut your rest short in order to meet family obligations such as transportation needs, run errands or complete household chores, or attend events - and in the end, you might not get the requisite rest during the day to fly all night long. Speaking of rest, let’s take a quick look at the regulations behind pilot rest for cargo airlines.
Part 121 vs. Part 117
The cargo sector is unique within the airline world in that they usually operate under Federal Aviation Regulations (FAR) Part 121 (Air-Carriers and Commercial Operators) rules without the benefit of FAR Part 117 (Duty Limitations and Rest Requirements: Flight Crew) rules. Part 117 currently only applies to airline pilots flying passenger operations. So what does this mean? Well, it means that although there is no biological difference between passenger pilots and cargo pilots with regard to the need for sleep and relief from duty, there is a difference in the regulatory rest requirements for pilots operating under Part 121 versus those stipulated in Part 117.
In January 2014, a new set of airline pilot rest rules in conjunction with on as well as off duty limits were established and issued to the industry under Code of Federal Regulations (CFR) 49, FAR Part 117. These new rules were based on actual sleep science, focused on the human body’s window of circadian low (the WOCL: “wah-cull”), the natural timing when your body most desires a nap or deep sleep. However, when the final Part 117 rules were rolled out to the industry, the cargo industry was conspicuously and contentiously left out; thereby relegating cargo pilots to remain working and resting under the antiquated Part 121 rest rules.
This is referred to as the “cargo carve out.” In 2019, legislation has been introduced in congress to include cargo pilots in this rule, but no vote has taken place. As with the initial passage of part 117, expect heavy lobbying from the cargo industry to prevent this from happening. The challenge for cargo carriers is that their operational platform is primarily based at night, thereby resulting in flights and flight crews scheduled routinely across the WOCL. Because of rest stipulations imposed by Part 117 when a pilot is exposed to flying in a WOCL, the resulting impact on a cargo operator would likely mean a massive need for more pilots as well as a dramatic increase in employee payroll expenditure. This is obviously good news for pilots, but potentially troubling news for the employers.
So, as a result of remaining under the Part 121 rest rules, pilots flying for a cargo airline can potentially fly longer flights, fly more flights, have longer duty days, and fly more duty periods before rest is required, compared to their passenger airline counterparts. Therefore, the on-duty and schedule limiting factors when flying for a cargo carrier could be only the pilot contract rules (or lack thereof).
Of interest though, some cargo carriers, such as Atlas Air, also offer passenger charters for the military; again, though likely familiar to many of you having transited to or from deployment zones on these carriers, flying in and out of a military base and even a war zone might be a new experience for many pilots. Unlike strictly transporting cargo though, these charters are required to be operated under the crew rest provisions of FAR Part 117, which can make swapping between the two rest requirements challenging at times. We will go into more detail on FAR Parts 121 and 117 in chapter 15.
Note: Some passenger airlines also conduct Department of Defense (DOD) charter flights under the Civil Reserve Air Fleet, or CRAF. These charter operations augment DOD airlift requirements when the need for moving personnel and equipment exceeds the capability of military aircraft.
Foreign Carrier Flying: Ex-Patriot Pilots
Ex-pat flying is another option, and one that may be well-suited to former service members and younger career pilots looking for adventure and travel abroad. In fact, during the lost decade (see next section), ex-pat flying was a popular alternative for many aviators facing outright unemployment as a pilot in the US. However, moving and living abroad can be stressful on friends and family life, and although you are typically allowed to relocate with your family, many carriers more or less require you to live and remain segregated from the local
population in a compound or designated ex-pat area. The associated housing arrangement is typically paid for by the foreign carrier, but restriction of movement and cultural norms (especially for women in middle eastern locales) can become challenging. To be clear, foreign carriers do hire female pilots, just understand what societal norms you or your spouse may be subjected to before you head out of the US. Also keep in mind that while the US industry certainly needs your flying skills and it’s likely that most of you would prefer to remain in your home country, opportunity abounds abroad as air transport is rapidly expanding globally. In fact, estimates for global aviation growth is staggering over the next 10 to 20 years.
Multiple “pilot need” projection studies (Boeing, Airbus, University of North Dakota and Embry-Riddle Aeronautical University, with some minor variance within each) demonstrate that in the US airline industry alone there are 23,000 cumulative retirements by 2025, based on the mandatory industry retirement age of 65 – and nothing about the coronavirus changes this fact. This number does assume a stable industry, with little or no growth, and does not include the estimated 5-10% early medical retirements, absences, and normal early retirements that occur prior to age 65. To put this into perspective, this is more pilots than are currently employed at the US regional airlines combined and more than half of the total number of pilots employed by the mainline carriers. Although we will address the “pilot shortage” later in this book, suffice it to say that the hiring outlook in the US is will continue to be extraordinary following the post-coronavirus recovery. The same will be true abroad and even more so where pilot hiring estimates are in the hundreds of thousands over the next 10 to 20 years.
With global air transportation markets rapidly expanding and the Near East and Middle East carriers building their transportation infrastructure as quickly as possible, coupled to a preference for hiring western trained English-speaking pilots and offering competitive pay and benefits, opportunity abounds overseas for the intrepid aviator seeking adventure. Chinese carriers are especially interested in recruiting ex-pat pilots, with internal air transport industry expansion plans including servicing 250 Chinese cities, each boasting populations in excess of one million. To put this quickly into perspective, there are only about 50 US cities supporting metropolitan populations of one-million or more.
Again, there are challenges to ex-pat flying though, the most obvious being that you will be away from home for long periods of time. Although many foreign carriers offer housing, transportation and other amenities, trip length can run into weeks at a time and in some cases you are relegated to living within the designated ex- pat compound while in the sponsoring country. Some companies do have commuting provisions for periodic travel back to the US; however, foreign carriers generally discourage the routine aspect of commuting back and forth in-between trips. Also, as the coronavirus outbreak of 2019 and 2020 has revealed, if there is a regional slowdown due to medical issues, weather disasters, political unrest, or economic turmoil, foreign pilots are usually the first to go (an not always in seniority order), and with little or no additional pay and benefits.
There are usually fewer work protections and duty day provisions, meaning no guaranteed time or a minimum number of days off. Great for making money, but potentially not good for the body and personal time. Often, a type rating on employer’s fleet aircraft is required in order to get hired. If you do not possess a type rating, the salary or benefits can be much lower and you might end up in a “pay for training” contract. Also of importance, the medical certification standards for foreign carriers are usually higher than the FAA first class medical standards; they are in fact, closer to what military pilots will be familiar with in terms of initial and recurrent flight physicals. It is also possible that your visa will be revoked if you end up with a minor medical issue that cannot be resolved in a few weeks. Also understand that you will be a non-citizen working in a foreign country subject to their laws. Some foreign carriers will have you surrender you passport, returning it when released from your employment contract. And if you get sideways with the employer, it might be an uncomfortable exit when they take your crew badge and tell you good luck getting home; and by the way, you owe us $100,000 for that training bond to be a pilot on the Airbus 330.
A quick internet search will yield a plethora of results for ex-pat opportunities, but take the time to do some research and preferably find someone to speak with about the realities of flying abroad. There is some fantastic flying to be done and lots of money to be made around the globe, so do not rule it out; however, understand that employee rights are not a universal concept in many parts of the world, and social and cultural constraints may be just that: uncomfortable constraints and not for everyone.
Airline Pilot Demographics and Diversity
It will likely not come as much of a surprise that this is a male, specifically white-male, dominated profession. We would like to say that this has been slowly changing over time, but in reality, it has remained fairly flat in terms of diversity. Based on FAA and the Bureau of Labor Statistics (BLS) data, there are approximately 165,000 licensed Airline Transport Pilots in the US. Of these, about 7,500 are women, or about 4.5% of the total. This has only increased about a single percentage point in 20 years. BLS data from 2019 shows less than 3% of US commercial pilots are African American, fewer than 7% are Hispanic or Latino, and slightly more than 4% are Asian.
Despite any impact of the coronavirus, the outlook for global aviation expansion and the need for pilots is tremendous, if delayed a little while. If we, as an industry, are to survive and meet the challenges of a looming pilot shortage, we need to encourage diversity and ensure that everyone understands that this is a career field that is open to them. This is a conservative profession, but this does not mean we are closed-minded; it means we are risk averse. Conservative decision-making is one of the key aspects of the job and what sets us apart from other professions, garnering the reputation for the safest air transport industry in the world. This is a career field that is open to all walks of life, creed, orientation, race, religion, and identity. There are many professional pilot organizations out there that can answer questions and provide personal and career support. We encourage you to seek them out and help us make the flight deck a more a diverse workplace. See the resource list at the end of this chapter for a compilation of organizations.
Airline Hiring
So, Where Should I Be Looking to Get Hired?
We are often asked this question and although aspects of this book will hopefully help you to narrow your search and prepare you for making the jump to the airlines, the bottom line is: What works for you? Ten years ago, few airlines were hiring so it really didn’t matter - you took a flying job where you could get one. While virtually all airline hiring stopped in 2020, everyone is or will be hiring shortly: fixed-wing, rotor-wing, corporate, government, cargo, passenger, domestic and international. The key is being informed, ready, and figuring out not only where you want to be now, but where you want to end up in 5, 10 or 20 years.
Although we will cover what you can generally expect during the hiring process, understand that each airline has its own assessment and employment method. Along with this, each airline has its own pilot contract, pay and benefits, bases, route structure, fleet, and culture. Just as variations in culture exist within each branch of service, unit, squadron, university, training program, or other air transport organization, similar permutations and distinctive group personalities are present at each airline; thus, you might find that a particular airline’s pilot culture appeals to you. Moreover, unlike a two or three-year stint at a given duty station or small air transport company, the airline you pick may be the place you are at for a while. So, be cognizant and deliberate in your career decision-making process. The shotgun approach to applying might yield multiple job offers, and while there is nothing wrong with this, tighten up your shot group and know what you are looking for and what you are willing to accept.
Other flying?
Of course, there are many other options to fly professionally: corporate, charter, firefighting, pipeline, flight instructing, law enforcement, news media, etc. It simply isn’t within the purview of this book to cover all of these different career paths. In the career fallout from the coronavirus pandemic, all sectors of aviation are going to be hurt for a while. Yet all will need pilots at the end of the downturn. These areas could provide you with an initial transitional step or a permanently rewarding career. Do not overlook potential opportunities while weighing whether the airlines are right for you and at the right time. This industry is all about timing. And speaking of timing, which is the first element to understand in the airline hiring process, let’s take a quick look at what occurred in the industry following September 11, 2001.
Post-9/11 Airline Industry: The Lost Decade
Without turning this into a “history of the airline industry” lesson, we will focus instead on significant industry events that occurred in the wake of the 9/11 terrorist attacks. It is important to note that this was not only a pivotal point in the nation’s history, but one that deeply impacted the industry that was utilized to perpetrate the associated atrocities.
The unofficial period following 9/11 became known as the “lost decade”, where multiple carriers filed for bankruptcy, thousands of employees were furloughed (laid off), or outright lost their jobs. Pay and benefits were indiscriminately cut in half or more by management groups at all levels of the industry seeking to artificially prop up profit margins along with the dismissal of airline retirement pensions through the corporate bankruptcy process.
The result was a complete lack of movement within the industry – especially following the shift from a mandatory retirement age for airline pilots at age 60 to age 65. Shackled to this was the abysmal pay and working conditions at the regional carriers, considered almost apprentice- type airlines at the time. This is where inexperienced and first-time airline aviators quickly built time and experience before moving on to the majors. Thus, the lower pay and benefits at the regionals pre-9/11 was generally viewed as unfavorable, but acceptable, because a pilot typically only spent a year or two before moving on.
However, when hiring stopped and layoffs occurred at the large carriers after 9/11, pilots were stuck for years (and in many cases nearly two decades), and were unable to move on and achieve their career aspirations. This was felt at all levels and at all carriers and operators in the air transport industry. The overall stagnation resulted in often bitter and widespread disenfranchisement across the industry, and not just limited to pilots of course, but with all labor groups suffering during this time. Although the airlines and air transportation in general have finally crawled out of this slump thanks to a number of economic measures to be discussed shortly, there is still a lot of work to be done to fully recover what was lost in this decade. Also, the lasting effects of COVID-19 have yet to be realized. To date, COVID-19 has been worse financially than the lost decade.
The Health of the United States Airline Industry
When we began writing this book (2019), the US airline industry had achieved nearly nine years of sustained profitability. Not since the days prior to airline deregulation in the late 1970s had the industry been so healthy. Although massive swings in economic volatility, bankruptcy, price wars, predatory marketing and airline turf conflict have marred the industry, consolidation through mergers and non-pricing competition between carriers in conjunction with capacity constraint, unbundling of revenue streams, fleet modernization, and (of vital import) the stabilization of fuel prices had resulted in its current state of economic wellbeing.
Pivotal to measuring this wellbeing is load factor, the central financial metric used by the airlines as a chief
indicator of profitability. Simply stated, load factor is the percentage of bodies in available seats on a given flight or set of flights (number of passengers divided by the number of seats). Technically speaking, it is the number of Revenue Passenger Miles (RPMs) expressed as a percentage of Available Seat Miles (ASMs), either on a particular flight or for the entire system; therefore, load factor represents the proportion of airline output that is actually consumed. For example, an Airbus 320 has a seating capacity of 125; at the time of departure, 111 seats are sold resulting in a load factor of 88% (111 ÷ 125). Pretty simple and straightforward math.
Available seat miles (ASMs) is the measure of an airplane’s carrying capacity available to generate revenue and represents potential income. ASM refers to how many seat miles are actually available for purchase on an airline. Seat miles are calculated by multiplying the available seats for a given plane by the number of miles that plane will be flying for a given flight; also referred to as revenue seat miles (RSMs).
Passenger Revenue Seat Miles (PRSM = “prazim”) is a measure of the number of miles traveled by paying passengers. Revenue passenger miles are calculated by multiplying the number of paying passengers by the distance traveled and represents actual income. For example, an airplane with 100 passengers that flies 250 miles has generated 25,000 (100 x 250) RPMs.
So, back to load factor as the central metric to airline operational and cost efficiency measurement. This metric has a critical impact on the nature and quality of services offered because about 65% of an airline’s costs are directly related to the operation of the aircraft and are “independent” of the number of passengers onboard (in other words, sunk or fixed cost). About a decade ago, the average industry load factor was around 60%, meaning the average flight in the industry had about 40% of its seats unsold or empty at the time of departure. Much like a hotel, if a room goes unsold for a night this is unrecoverable revenue; and like the hotel industry, airlines began seeking ways to maintain a high load factor and drive down the number of unsold seats.
The strategic way to not only increase load factor but also profits at the same time was to take seats out of the system by reducing or eliminating flights between certain markets or by changing the size of aircraft flying a particular route. This reduced availability (supply), and over time increased load factor (demand). The interplay here is of course a standard supply and demand curve where ticket prices have gone up over time, along with profits and in turn, employee pay and benefits have increased as well. The downside is that for the pilot who commutes to work or is trying to enjoy the travel benefits associated with airline employment, the relative lack of available seats can make standby travel or non-rev travel challenging (more on commuting, non-revenue travel and jumpseating in chapter 10).
The Health of the Industry Moving Forward
The overall employment benefit to a healthy industry is stability and movement. In pilot terms, this means quick upgrade times from first officer to captain, fleet and base choice, good pay and benefits along with high quality schedules that allow you to balance work and life. Because all of this vanished in the early 2000s, airline employees became dejected and embittered. Add to this the yet undetermined long-term effect of the 2019 coronavirus and you can appreciate the current apprehension in the airlines over the possibility of yet another lost decade. However, there were many lessons learned during that period. Global factors are also less of a consideration this time as the international banking system underwriting the coronavirus recovery is still healthy.
At this point in the writing of the book (2021), as the prologue mentioned, the global airline industry is facing a massive health crisis. There is no doubt it is going to survive and mend, but the road to a complete recovery will no doubt be long. A constriction and downsizing of the industry will likely occur, though the fundamental financial principles that lead the industry back to profitability post-9/11, may or may not be incorporated into a new strategy as we move forward.
Post-Coronavirus Recovery
Maintaining high load factors through strict control of available seats is referred to as capacity discipline and has become a central factor in keeping air carriers profitable. This involves the careful management of the supply and demand curve, and seeks to sell every available seat on a given flight. In the current environment, capacity discipline is being used to cap available seats in order to manage losses with some airlines removing the sale of middle seats to help increase social distancing, though this practice is starting to fade away.
On a going forward basis, this is not economically sustainable. While the new normal may demand greater space between passengers, flying aircraft around at a 70% load factor does not generate enough revenue to remain profitable without a dramatic increase in ticket prices, perhaps as much or more than a 40% increase. As the vaccine is made more available, and increases in treatments are rolled out, these variables are sure to change.
Note: In the current coronavirus environment, cash burn has become a critical factor in determining airline health. Simply put, cash burn is the amount of money an airline is losing on a daily or monthly basis as a result of low passenger demand. For instance, Delta Air Lines lost $12 million a day in 2020.
Also helpful in post-9/11 airline profitability has been the unbundling of revenue streams – the nickel and diming of passengers beyond the base price of their ticket. These items, such as food, beverages, wifi, seats with more legroom and baggage fees, create over a billion dollars annually in ancillary revenue. By offering a more attractive base fare ticket, the airline passenger feels better about paying for air travel, and although generally dislikes having to pay for additional services, the ala carte style provides options.
This business model may hurt some airlines in their effort to regain profitability in a post-coronavirus industry where passengers may associate the least expensive ticket with the least invested in cabin cleaning and disinfecting procedures. Although this could lead to consumer avoidance, it could also lead to earlier profitability over larger mainline carriers if the least expensive ticket model is in-line with the actualities of consumer finances post viral crisis.
Fleet modernization has been another area where air carriers have saved money through investment over the last 10-years. From new composite-based aircraft (think Boeing 787) to biofuels, airlines have looked to save operating capital though more efficient, especially fuel efficient, operations. And speaking of fuel, in addition to capacity discipline, the stabilization of fuel cost (on average 36% of total airline operating budget) cannot be overstated.
In fact, this may be one facet of airline profitability where the industry has quickly aligned with the virus. Most airlines had five to ten year retirement plans for older aircraft (DC-10, MD-88, 757, 767, etc.), slowly phasing them out as newer more efficient aircraft came in. The challenge of replacing a fleet all at once is major loss of capacity and therefore revenue. In the current environment, there is effectively no need for much capacity, allowing airlines to shed older fleets with little if any negative impact on revenue. Although it is of course expensive to train pilots and creates manpower shortages in scheduling, with hardly any schedules to fly at the moment, this is a good time to retire aging fleets and train pilots on new ones. The overall result being a relatively minor cost in exchange for a more efficient airline emerging on the other side of the downturn.
When crude oil prices peaked at over $100 a barrel in the 2000s, it didn’t just drive up household cost with soaring fuel prices at the local gas station, it nearly decimated the airline industry. With fuel prices having dropped by more than 50% since 2014 to around $30 - $40 a barrel, profit margins are back in the realm of reasonableness. All of these factors, along with a strong economy, help to paint a bright future for this historically turbulent industry.
Again, in line with the novel coronavirus, oil prices, at least for now, are below $20 a barrel. This of course will not last, but when producers are paying consumers to take large quantities of oil from them for refinement purposes (because it is more expensive to shut down well production than to simply give it away), a lasting consequence may be depressed prices for a while. Bad news for the oil industry, but very good for a largely fossil fuel dependent industry.
Summary
Changes are occurring as they always do in this industry. This is the cyclical nature of the industry: a natural and continual cycle of peaks and troughs, highs and lows, successes and failures. It is an industry closely tied to the health of the national as well as global economy. Currently, we are watching this cycle in real time as airlines around the world are losing hundreds of millions of dollars a day. The industry, especially in the US, had an upward run in the 1990s to solid profitability, and then the lost decade as previously mentioned; followed by the most profitable decade in its history. We are now looking at a historic decline. However, the air transport industry will recover and return to a strong, upward trajectory, providing excellent opportunities making this a great time to start planning your transition.
