For the past few years, securing a pipeline of new pilots has been a primary concern for airlines around the world. In a 2019 Oliver Wyman poll of flight operations leaders, 62 percent listed a shortage of qualified pilots as a key risk. The root cause of the coming shortage varies by region: In the United States, it’s an aging workforce facing mandatory retirement, fewer pilots exiting the military, and barriers to entry, including the cost of training. In China and other regions where a burgeoning middle class is demanding air travel, the struggle is to expand capacity fast enough.

The impact also depends on the class of carrier, with 83 percent of regional carriers finding it challenging to recruit talent compared with 22 percent of low-cost carriers. Despite these differences, there were few regions in the world that weren’t dealing with how to secure enough pilots to fuel future growth.

Nearly overnight, with the outbreak of COVID-19, the conversation shifted from shortage to surplus. For carriers that were struggling with pilot supply, this has provided a momentary reprieve. It will not last, and decisions taken today to survive the coronavirus pandemic may threaten the ability of airlines in some regions to recover and grow in the future.

The return of demand

A major question facing the aviation industry is when demand will return. For passenger recovery, estimates range from early 2022 to 2024 and beyond. For pilots, however, demand is driven by aircraft departures and utilization rather than passengers. The global in-service fleet has already recovered in size to 76 percent of pre-COVID levels. In China, where the outbreak was earlier and better controlled, the in-service fleet is already at 99 percent. While utilization and resulting block hours still lag historic levels globally, we expect the demand for pilots to proceed the recovery of passenger growth by two to three quarters.

In recent years, airlines have provided a more direct path to the cockpit for new pilots, expanding cadet training programs and providing financing. With COVID, many of the airline pipeline levers have come under pressure. Faced with mounting costs and a pilot surplus, cadet programs are being trimmed. Some of the banks that have supported the financing are reconsidering the risk profile of a new pilot cadet. Finally, the attraction of a stable and lucrative career path now looks much less secure.

These trends have created a supply shock. Pilot candidates will think twice about entering such a cyclical industry. Many furloughed pilots will return, but some may pursue other opportunities. Finally, airlines in some regions have relied heavily on early retirements to reduce costs, which will permanently decrease the supply. Looking at past crises such as 9/11 and the global financial crisis, new pilot certifications fell 30 to 40 percent during the five years after the initial shock. With the global nature of this shock, we believe 25,000 to 35,000 current and future pilots may choose alternative career paths over the next decade.

Emergence of the pilot shortage

The most important question is not whether a pilot shortage will reemerge, but when it will occur and how large the gap will be between supply and demand. Based on a modest recovery scenario, we believe a global pilot shortage will emerge in certain regions no later than 2023 and most probably before. However, with a more rapid recovery and greater supply shocks, this could be felt as early as late this year. Regarding magnitude, in our most likely scenarios, there is a global gap of 34,000 pilots by 2025. This could be as high as 50,000 in the most extreme scenarios. Eventually, the impact of furloughs, retirements, and defections will create very real challenges for even some of the biggest carriers. One cushion airlines have created consists of 100,000 pilots still on payroll but flying reduced schedules or on voluntary company leave. In the US, such programs have been very popular and will provide the airline some flexibility once the industry begins to recover.

Perhaps more important than the global view are the regional projections. Recovery is not expected to be uniform across the globe and each region has its own demographic considerations. In our analysis, North American, Asia Pacific, and the Middle East are likely to see the largest shortages while Europe, Africa, and Latin America remain closer to equilibrium. In North America, with an aging pilot population and heavy use of early retirements, the shortage reemerges quickly and is projected to reach over 12,000 pilots by 2023 — 13 percent of total demand. However, Asia Pacific, with a faster growth trajectory will surpass this by the end of the decade with a projected shortage of 23,000 pilots by 2029. This can have real implications on the timing and depth of regional shortages as pilots migrate to areas of opportunity, potentially accelerating or deepening shortages in other regions.

In Europe, the supply and demand of pilots are expected to be balanced over the next three to four years.  A few European airlines even suspended training and recommended to pilots in training that they abandon the profession altogether. Our view is not so radical since these very candidates will be necessary in the longer term in Europe and could provide valuable service elsewhere across the globe, particularly in Asia.

What airlines can do

For airlines who are currently struggling to right size the operation and remain solvent, the idea of a pilot shortage is far from top of mind. However, it has the real potential to limit their ability to regrow and rebuild their operation in the coming years. There are three main areas where airlines can help to reduce the impact of future pilot shortages:

• Reduce pilot demand: Take the opportunity to rethink crew operations and improve crew productivity, thereby reducing the total pilots required, while driving down costs in the process
• Reinforce the pipeline: Continue to invest in training programs and pilot recruitment, including resolving emerging financing challenges
• Engage the workforce: Recognize the likelihood of increased competition, particularly for furloughed pilots, and actively engage to improve retention

How quickly airlines can regrow their operation will be guided by how quickly they can regrow their pilot ranks. Those that take action now increase the agility of the airline to capture demand as it recovers.