Oil Costs and Pilot Employment

[VATechPilot]

Assuming oil prices hover around the current prices, i.e. $110ish a barrel, from here on out, what will this mean for the job outlook for pilots. Do you believe this will effect the current pilot shortage? Beyond that, do you see in the near future a possible return of a pilot surplus and with it, pay cuts, furlongs and very little hiring?

[Doug Taylor]

I think it's going to have a lot more to do with the economy above and beyond oil prices.

Most of the cost of a barrel of oil is speculation and a laughable US dollar.

Remember, it's an economic cycle. When times are good, people think it should last forever. When times are difficult, everyone thinks it's the end of the world.

It's somewhere in between.

[H46Bubba]

Originally Posted by VATechPilot

Assuming oil prices hover around the current prices, i.e. $110ish a barrel, from here on out, what will this mean for the job outlook for pilots. Do you believe this will effect the current pilot shortage? Beyond that, do you see in the near future a possible return of a pilot surplus and with it, pay cuts, furlongs and very little hiring?

I'm gonna assume that you're going to VT? Can always use another Hokie on the boards!

[Screaming_Emu]

Originally Posted by H46Bubba

I'm gonna assume that you're going to VT? Can always use another Hokie on the boards!

Hell yeah, my brother goes to school there! Great school.

[SpiraMirabilis]

I think that it may be a good time for turboprops to come back harder.

[taildragger173]

$110 oil prices means that the high CASM 50 seater jets have lost any cost advantage that they once had. Most new pilots are going into 50 seat jets and with the current economic state those might end up getting parked. You'll probably start seeing hiring freezes soon as well as possible furloughs. This time though, I dont think that the mainline carriers will be as affected as the regional carriers. ExpressJet offereing COLA's is the first sign that the industry is turning around.

[VATechPilot]

First off, it's so awesome to see all the hokies on this forum, it's crazy!!

Originally Posted by taildragger173

$110 oil prices means that the high CASM 50 seater jets have lost any cost advantage that they once had. Most new pilots are going into 50 seat jets and with the current economic state those might end up getting parked. You'll probably start seeing hiring freezes soon as well as possible furloughs. This time though, I dont think that the mainline carriers will be as affected as the regional carriers. ExpressJet offereing COLA's is the first sign that the industry is turning around.

What does that mean though, will the shortage of pilots be reversed in general, or just in the regionals? And if it's just the regionals, what will that mean for people trying to get into the airlines? A better chance of getting into the mainline carriers off the gun, or just a harder time getting hired by the airlines in general?

[taildragger173]

Originally Posted by VATechPilot

What does that mean though, will the shortage of pilots be reversed in general, or just in the regionals? And if it's just the regionals, what will that mean for people trying to get into the airlines? A better chance of getting into the mainline carriers off the gun, or just a harder time getting hired by the airlines in general?

There is still a shortage and that probably wont change that quickly but hiring will slow down because the regionals are going to see less growth or will stagnate. There will probably be little movement in the industry as oil continues to climb. A lot of this can be changed if airlines would be able to charge what it costs them to fly the flight. AirTran offering $69 walk up fares from ATL to TPA forces Delta to do the same...the result, neither company makes money. If that ticket was $400, the industry would probably do alright.

Economics is finally starting to take over. Since the airlines can not just raise fares, they need to do it in other ways. To accomplish that, if there is a reduction in supply for the same quantity demanded, those seats become a scarce resource and prices will naturally climb. Where is the capacity being cut? Those little jets. A CRJ-700 only needs 3 more people onboard compared to a CRJ-200 to break-even. 50 seat flying is just not economical in most cases anymore. By reducing capacity by a few percent, that can have an enormous benifit to the airlines. The problem though then comes from the fact that someone else will always undercut and provide extra capacity into the market (ahem...Skybus, Virgin America, jetBlue...). Its a hard battle to win.

[Minnesota_Flyer]

Originally Posted by VATechPilot

First off, it's so awesome to see all the hokies on this forum, it's crazy!!

Yeah. It's amazing that there's so many of you guys who actually know how to use a computer.

[tonyw]

Well, it looks like some airlines actually get it and say, hey, we've got record load factors, and we've got to cover our costs, so let's jack up our fares.

United just raised theirs by $50 and it looks like the fare hikes will stick.

Yes, Aunt Bessie, the days of the $99 transcon are over. Or they should be.

This may mean less fannies on planes, which may mean less employment for airlines.

[Doug Taylor]

If your carrier has international presence, you'll be fine.

Lots of Euro butts in seats coming to the US for el cheapo.

Funny thing is that it's a rarity to see Americans traveling to Europe in large amounts.

[mrivc211]

word around these neck of the woods is they asked the FA group to voluntarily take off the month of April without pay. Someone posted the official email in the pilot forums. That can't be good.

[flyingmaniac]

Right now I'm in class for the CRJ-700. Everyday I look at the price of gas and wonder when will the airlines ask my class to not come back. But I feel a little better because the 700s save more gas than the 200s. Nowadays there are more people flying so the smaller jets aren't economical anymore because the airlines can keep the larger jets seats full.

[kellwolf]

Originally Posted by Doug Taylor

Funny thing is that it's a rarity to see Americans traveling to Europe in large amounts.

Not funny, sad. When you can stay for a week at a nice hotel at a nice vacation spot in the US vs spending the night in an okay Euro destination thanks to the weak dollar vs Euro, it's pretty sad. I would very much like to go to Europe one day, but with the Euro beating the dollar to a bloody pulp, it's gonna take twice as much cold hard cash now as it would have 5 years ago. Meanwhile, the flow going the other way is insane since those that get paid in Euros can go to Disney World for dirt cheap.

And FedEx wonders why no one wants the Paris base.....

[abrutus]

Summing up.
Oil prices Go Up....... Hiring Will go Down... (sooner or later).
Oli Goes up, A flight becomes less profitable, airline starts looking for ways of increasing that profit (if there is any at all), so they either Cut your salary/benefits or Furloughs....(Cola´s in a better scenario ). So basically...
Its a Swicht in Places.... The more oli decides to fly around the skies.... The more Pilots Are grounded!

PILOTS BELONG IN THE SKY! NOT OIL PRICES!!!

[Doug Taylor]

I'm sitting here in a Starbucks in N. Scottsdale, and the usual "Holy Cow! This place needs a brass pole!" eye candy has been replaced with British and German tourists.

"Have you non sparkling mineral water?"

Gah! What's next, you gonna axe for a yorkshire pudding?

[H46Bubba]

Originally Posted by Doug Taylor

I'm sitting here in a Starbucks in N. Scottsdale, and the usual "Holy Cow! This place needs a brass pole!" eye candy has been replaced with British and German tourists.

"Have you non sparkling mineral water?"

Gah! What's next, you gonna axe for a yorkshire pudding?

Hey, you're the one's that's briggin em over here!

[JA Yawd Bwoy]

Originally Posted by H46Bubba

Hey, you're the one's that's briggin em over here!

[Doug Taylor]

Originally Posted by H46Bubba

Hey, you're the one's that's briggin em over here!

Oh, I'm not complaining, Bro'seph!

If not for them far'ners, our economy would be in a much worse situation.

[SoCalAprch]

Originally Posted by Doug Taylor

I think it's going to have a lot more to do with the economy above and beyond oil prices.

Most of the cost of a barrel of oil is speculation and a laughable US dollar.

Remember, it's an economic cycle. When times are good, people think it should last forever. When times are difficult, everyone thinks it's the end of the world.

It's somewhere in between.

Agreed 100% It all has to do with the economy. If the economy were flourishing people could afford to travel more and pay higher fares for tickets. If the dollar were worth a damn people would be willing to go spend it at favorable exchange rates in other countries. The economy is tanking so people don't want to travel and if they do they can't afford to pay the higher prices that would be profitable for the airlines. Thus a double whammy to the crotch of the airline industry. Expensive fuel and poor americans = TOUGH times for airlines. The airlines will end up taking a hit but will be fine. Like Doug also said its a cycle. I think they say every 10 years or so but Im not sure.

[WAFlyBoy]

Originally Posted by SoCalAprch

The airlines will end up taking a hit but will be fine. Like Doug also said its a cycle. I think they say every 10 years or so but Im not sure.

Seeing that airlines have been operating in a competitive market environment for only 30 years, I wouldn't be too quick to make assumptions about the "cycle." Especially when several "legacy" carriers wouldn't exist today if it weren't for Federally backed support during the last economic downswing.

[SpiraMirabilis]

Air travel is necessary for America. It's not as though the capacity can just take huge hits very quickly. Even with oil at $100-110 a barrel with 50 seat RJs not making much economic sense you still won't see them vanish overnight -- there are A LOT of them and they're too busy flying people around to be gotten rid of and more importantly most airlines dont have anything to replace them with right away. I imagine that the future orders for new 50 seat jets might see a pointed diminishment. This has already started to occur though -- it seems like most new "regional jet" purchases are of the 70-100 variety. This is combined with the fact that 2007 was a _HUGE_ year for hiring. Some airlines hired a bit too much so they dont need as many pilots in 2008.

The sky isn't falling. The strategy of airlines is likely undergoing a change to a more economic one -- for example Colgan is purchasing 15 70+ seat Q400s which while slower are more fuel efficient than an equivilent jet (CR7.) The Q is a great aircraft, especially for a carrier whose hubs are relatively close together like in New England. (Personally I'd like to see every regional be primarily turboprop operators again, but thats just me and for personal reasons.)