Explainer-Why U.S. Airline Pilot Salaries Outpace Global Hikes

By Jamie Freed

(Reuters) – Delta Air Lines has offered a 34% cumulative pay rise to its pilots over three years in a new contract, in a deal widely expected to become a benchmark for negotiations at rivals United Airlines and American Airlines.

But the proposed Delta contract is unlikely to set a global precedent for anti-inflationary pay increases for pilots, analysts say, due to factors unique to the U.S. market.

FASTER TRIP RECOVERY

The domestic aviation market in the United States has rebounded to pre-pandemic levels much faster than markets in other parts of the world, according to data from airline industry group IATA.

US domestic demand was just 0.8% below 2019 levels in October, while globally domestic travel demand was 22.1% lower. In September, US domestic demand was 0.8% higher than in 2019.

For international travel, North American demand in October was 10% lower than in 2019, compared to a 17.6% drop in Europe and a 56.6% drop in the Asia-Pacific region at a time when China, once the largest outbound travel market in the world, remains effectively closed.

The U.S. rebound is a major reversal from 2020 when thousands of pilots, including 1,800 at Delta, retired early under airline encouragement after COVID-19 led to a slump in demand.

SHORTAGE OF REGIONAL PILOTS

The big pay rise offered to Delta pilots follows a series of big raises at US regional airlines that serve as backstops for major carriers.

Unique among global markets, the United States requires pilots, even on regional airlines, to have a minimum of 1,500 hours of flight experience. The rule was put in place after a fatal Colgan Air crash in 2009.

In other parts of the world, major carriers like Lufthansa and easyJet offer training programs that require no prior experience and allow participants to fly as a co-pilot upon completion.

In the United States, obtaining a commercial pilot’s license can cost over $70,000, followed by the need to accumulate 1,500 hours of work in a relatively low-paying job, such as being a flight school instructor. even before joining a regional airline.

The US Federal Aviation Administration in September rejected a request from regional airline Republic Airways to halve the minimum requirement to 750 hours.

Faced with growing shortages of entry-level pilots and the rapid attrition of more experienced pilots to major airlines, US regional carriers have rapidly increased their salaries.

For example, Piedmont Airlines said in June it would nearly double first-year salaries for captains and first officers to $146 per hour and $90 per hour respectively.

The increases put pressure on major airlines to ensure their entry-level salaries attract new entrants from regional carriers to cover retirements and projected fleet growth.

OUTSIDE THE UNITED STATES

North America is the only region currently experiencing a shortage of pilots, which equates to about 11% of supply, or 8,000 pilots, consultancy Oliver Wyman said in July.

Europe and Asia have pilot surpluses that are expected to hold until the middle and end of the decade respectively, he said.

Salary increases realized by pilots outside the United States reflect the different supply situation and are often in line with the percentage gains offered to all airline employees as the business recovers from the pandemic and that inflation increases.

In Australia, pilots of the low-cost Jetstar branch of Qantas Airways last month agreed to a two-year wage freeze followed by annual increases of 3% and a one-time bonus of around AUD 10,000 (6 $843.00), the same offered to other workers.

Hong Kong’s Cathay Pacific Airways said it would increase base pay by an average of 3.3% in 2023 and offer bonuses equivalent to the equivalent of one month’s salary to Hong Kong-based staff meeting the targets of performance.

In September, Air France raised wages for all staff by 5% ahead of wage negotiations scheduled for next year and offered a bonus of 1,000 euros ($1,057.50) to its workforce.

($1 = 1.4613 Australian dollars)

($1 = 0.9456 euros)

(Reporting by Jamie Freed in Sydney; Editing by Robert Birsel)

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