Jeff Green
And so, the decisions that the carriers are making now regarding which aircraft to fly, how many pilots to have on staff, and how many pilots to furlough, can have important consequences for training demands later on. And this could cause what we're calling a pilot training bubble.
Narrator
On today's episode of the Velocity Podcast, we’re joined by Geoff Murray and Jeff Green as they discuss unexpected obstacles airlines may face getting back into service at the end of the current coronavirus pandemic. For more information on this show, take a look at our show notes. Thank you and enjoy the show.
Geoff Murray
Geoff Murray, partner at Oliver Wyman, joined by Jeff Green, one of our most proficient and widely recognized project managers within the firm who's managing a project that's related to the topic that we get to talk about today, which is the challenges associated with airline relaunch post a contraction like the one that we've seen recently that's associated with COVID-19. And there are several major operational pilot related issues that come to mind, particularly related to training during a contraction and an airline's ultimate expansion. And that's due to the seniority basis that exists for many flight crews and many labor represented pilot groups, whereby seniority rules the day. And if you're senior enough to be flying a nice wide body international aircraft during the COVID related contraction, international flying has been cut back and almost largely eliminated. A lot of those pilots will be trained on narrow-body aircraft that’s been consumed a lot of time, energy, and money and then when the airline one day expands again and returns to the operations that it was prior to COVID, do the same pilots need to be trained again? Airlines don't design their training departments in capacity and simulators to accommodate that kind of demand. So, Jeff, I'm interested since you're right in the midst of a project, that’s looking like this. Do you have a sense for this could do in terms of airline relaunch, the potential delays.
Jeff
Sure, Geoff, and first, thank you for that very warm introduction. I’m not sure if I merit all those compliments but I'll take what I can get. Second, I wish we could do this in the office today, but obviously, with the shutdown that we have here in Chicago, we’re not able to do that, but fortunate enough to be healthy and I'm going to be talking to you over the phone. And to answer your other question, Geoff, yes, I think that the impact of COVID on airline pilot training is significant and it could put a very big stress on the training infrastructure. And so when carriers were thinking through this, this is an unprecedented issue. They haven't dealt with anything like this before and so carriers making decisions that made in the either a long time, if ever. Changes to their strategies, changes their networks to their workforce, number pilots, they want to have on staff etcetera. And so, the conditions at the carrier's making now regarding which aircraft to fly, how many pilots down on staff, how many pilots to furlough can have important consequences for training demands later on. I mean this to cause we're calling a pilot training bubble. So, a couple causes of this pilot training bubble, first is with what’s called pilot currency and for those listeners who aren't it's familiar with the industry terms, currency is just a way to describe a pilot that's able to legally flying aircraft. And in many jurisdictions, the governing bodies… So for example, the Federal Aviation Administration says that pilots must have a certain number of takeoffs and landings in a certain time period and go through a periodic training called recurrent training. However, if pilots are going to be furloughed, they are at risk for losing that currency and this is important when those pilots eventually get called back to fly on behalf of the airline because they’ll have to be to requalified. And what that means is they'll have to undergo a training that can last for a few weeks if not a few months and that's a training demand that airlines are not typically used to dealing with and are not able to incorporate that into their typical training plans or training capacity. So that's one major thing that airlines will need to think through. A second consideration as you alluded to earlier, Geoff, is how airlines are shifting around the types of planes that they’re flying and how that's happening in conjunction with any furloughs that they're making. And so, as you said Geoff, seniority rules the day and when airlines do furlough pilots, they typically furlough from the bottom of the seniority list. So, the pilots that have been most recently hired are the ones that are furloughed first. Now, these aren't necessarily the pilots that are flying the planes that are being parked. And so, as airlines deal with smaller list of pilots, they’ll have to make sure that those pilots can fly the planes that are still active in the fleet. And so, this is going to require things like transition trainings. If pilots are transitioning between different types of aircraft, or another type of training is upgrade or downgrade training as pilots shift from the captain roll to the first officer roll or vice versa. And so, all of these different impacts the currency question, the transitions, the upgrades, the downgrades, this is creating a pilot training bubble, and airlines are starting to think through now how big this bubble will be and how they can deal with it. And so, Geoff, I would love to get your thoughts about what airlines can be doing now to mitigate the training demand bubble.
Geoff
It's a great question Jeff. And I think there's a lot that can be done to mitigate the bubble. In the case of the airline that we were working with now, we see this one case in that training could be double what typically occurs in a normal operating environment. For example, if we looked at the airlines training department a year ago we would see, and I'm just going to make up a number, 50 events per day that would be moving through the flight operations training department, but during the period of contraction and ultimate expansion that training volume in the case of this one airline can be as much a double, double the volume. So, instead of the 50 events, it’s now 100 events and as you’ve noted the complexion of those events is very different than a year ago. A year ago, if you or I walked into this training department and poked our head into the simulators, we'd see, the majority of the training in the simulators associated with what's called recurrent training which you talked about a few minutes ago, which is a regulated training event that takes place typically every nine months, sometimes every year and a pilot goes in the simulator demonstrate that, he knows how to handle emergencies and understand all of the proper call outs and limitations, and profiles as they're called in the flight training world that the airline uses. So that would be the majority of the training. And if we looked a month from now into that same simulator, we may see a former wide body captain who's now being trained on a narrow body. And similarly, his first officer used to fly a wide body is now flying arrow body. So that's called transition training. So, we see the complexion of that training changing dramatically and that has as you noted, profound implications on you know, some of the decisions that airlines make in terms of you know, frankly furloughing pilots. So, you know, to what extent can you furlough and not overwhelm the training department because frankly, one of the easiest things, for an airline to do is to not furlough anybody. But then you’ve got an airline that is staffed for a much bigger operation so much more expensive. Certainly, the current environment dictates where we've got traffic that much as 80 or 90% below levels from a year ago. So, if you think Jeff, if you think through the ultimate expansion, what are some of the major, you know, consideration that you think, you know, airlines and flight operation leaders in particular should be paying attention to.
Jeff
Well Geoff, I think sort of the first order question is, as you mentioned what that training demand looks like, is it going to be twice as much as I was dealing with before as an airline or three times as much. Next question is, how do I deal with that training bubble, because the risk is if I don't deal with it, then we could potentially slow down the airlines relaunch then, especially as airlines are struggling right now, financially, they certainly don't want to handicap themselves in being able to relaunch them and fly the flights that the customers are wanting to pay them for. And so, this could be going to external training providers and securing similar capacity with them. It could mean buying additional simulators now so that they're ready to be used in the future when the airline is in the process of relaunching. Some other creative solutions that I think airlines are going to need to think through as well, potentially collaborating with their pilot unions to make furlough rules more flexible to be able to change things like minimum pay guarantees or some of the training schedules that they've agreed to previously with their unions. Other types of things that they can be looking through are partnerships with either other airlines or airlines that are part of their, the same holding companies. And so, if an airline holding company owns multiple carriers in a portfolio, they could consider sharing the training capacity across the different subsidiaries. Those are a few of the different mitigating actions, Geoff, that airlines to be thinking through. Do you think there are any others?
Geoff
I mean, I think those are the biggies. I think at the margin there’s going to be a lot more attention paid to the length of some of that training and you know, historically some of the transition training, for example, could take six or eight weeks, but you didn't have a lot of it. So now that airlines are dealing with a considerable amount of that training. I think they're going to be looking for ways to very thoughtfully, you know, accelerate some of that training and some of the tool strategies and tactics that we were seeing the deployed to do that as a greater proportion of distance-based learning, historically airline pilots are trained in a classroom with 20 other pilots who sat, listen to one instructor for eight hours a day. And now with the profile of pilot groups change, the majority of pilot that are hired are no longer former military. They are much younger now; they're very used to different learning environments and that kind of thing. And of course, we're in this COVID-19 area becoming very accustomed to joining zoom and doing a lot of things that we would have done from an office environment, from home. So, we fully expect to see greater proportion of distance-based learning pilots, of course, would still get paid for that. They're still going to have to pass the same exams, but that enables the airline to compress that training a bit so you can get more pilots through these different curricular quicker. And I think another major element of this and Jeff, maybe we can get your perspective on this is the recovery. And I know we're guessing here. But there are certain quarters of the airline sector that think the recovery could be really quick, if we get a vaccine and testing is successful then we may see air travel come back just as rapidly as it contracted. What are your thoughts on how airlines can position themselves to be ready for a rapid return of travel like that?
Jeff
Well Geoff, I think in addition to some of the things that you were mentioning before about being able to deal with his training bubble. Another thought is to take a look at the number pilots that airlines are actually going to furlough and give themself the question of, is that the right number? Airlines could benefit potentially from under furloughing to, to have a few extra pilots on staff now, to give them the option to respond faster and build up their networks faster, when the demand from passengers comes back. As you mentioned, the training that pilots are going to have to go through, the transition, the requalification, the upgrades, it's got a longer timeframe than the traditional training that airlines are used to dealing with. And so, by having a few extra pilots on staff that don't have to go through that training the requalification trainings, some other larger training footprints, as we call them in the industry. They could give them that optionality to expand faster. That being said, it is going to cost them a little bit more in the meantime as they pay these pilots to be on staff who aren’t as productive as they would be otherwise.
Geoff
That does make a lot of sense, because the airlines are effectively going to be making a bet. It's like. do I position myself to have a whole bunch of old pilots ready to go waiting for this demand and what if the demand does it materialize? And as you mentioned before, these are just completely uncharted waters for the airlines.
Jeff
Well Geoff, there is one thought that that I was having, and this goes back to some of the conversations we were having with our clients a year or two ago, just around the pilot shortage. And so, this is what we were saying in the industry where airlines were expanding pretty fast, all over the world and there weren't enough pilots to meet that demand. Airlines were setting up new systems and new programs to be able to hire pilots and train them quicker. Obviously COVID has changed the dynamic quite a bit. But Geoff, I would love to get your thoughts about how that has impacted the overall pilot shortage.
Geoff
I think that's a great question and if our listeners, if they didn't find out already, Jeff and I and other folks at Oliver Wyman every year publish a flight operation survey that I would encourage our listeners to take a look at. One of the major themes of the last couple survey was around the pilot shortage. And frankly, it was only three or four months ago that we were hearing about airlines buying training academies and going out to high schools to find potential pilot candidates that they could sponsor through college or university or military programs. So, I'm sure a lot of pilot candidates and families and even airline pilots are wondering if this shortage is ever going to be relevant again. In our perspective, absolutely the industry is going to return and as you and I know but our listeners may not know, the profile of the average US airline pilot is somebody who’s within five or 10 years of retirement. So, a handful of US major airline within the next 10 years are going to have half of their pilot workforce retire so our prospective is, this is a significant bump in the road, but the folks who complete their training, who position themselves… the airline pilot three years from now is going to be a tremendous environment. Airlines need to continue their outreach to their pilot candidates and assure them that look, you're going to have a job, maybe in the next year or the year after that but give us these two or three years and we'll have a place for you and encourage that level of communication engagement with pilot candidates. Jeff, what were some of the other major themes we hit on in this year’s survey that are worth highlighting in this discussion?
Jeff
Well, I think engagement, pilot engagement across the board continues to be a major theme. And this is an even more important concept now as airlines are going through some of these tough decisions and many have already with the respect to furloughs and layoffs and generally that it's gist that we heard from the folks in the industry that we spoke with is that tied engagement is really important and we as an airline industry have not cracked it yet. But as we head into this world COVID, furloughs, et cetera, it's going to be even more important to stay engaged with our pilot workforce, to let them know what is happening at the company, to help them be a part of the company's mission of helping to solve some of the company's problems that they're facing with the whole crisis. Enable the pilots to be a part of that solution.
Geoff
Frankly, probably a great way to summarize the discussion is to maintain that level of engagement and encourage pilots and other elements of the airline workforce to be part of that solution, because this is the airline industry. Every time there's been a downturn, whether it was a global economic crisis, whether it was 9/11, the industry has come back stronger, come back more resilient. We’ve seen different business models succeed. And I think we're going to see that when the airlines really start re-emerging strong in the next few years.
Jeff
Thank you so much, Geoff, for that interesting discussion. And as you said, planning ahead is really going to help these airlines, these carriers emerge from their crisis, more quickly and stronger. That's all from us today. Thank you all for listening. Please join us next time as we tackle more topics around the industry's challenges and disruptions.
The Velocity Podcast is brought to you by management consulting firm Oliver Wyman. If you enjoyed today’s show, we invite you to subscribe so, you'll be notified when a new episode goes live. For our latest insights and analysis on the coronavirus pandemic, head to the Oliver Wyman COVID-19 Navigator. The link is available in our show notes. Thank you, and we hope you enjoyed the show.
This transcript has been edited for clarity.
