Weekly Aviation Industry Updates: March 23rd, 2020

I know your inbox and social is getting filled with fake messages of caring and positivity. The reality is, this situation is a disaster and now is not the time for counterfeit sincerity or selling products and services. It is, however, the time for us to collectively figure out how to calm down, avoid hurting each other, and start getting ready to pick up the pieces when this is all over. We must shift our focus off the cripplingly bad news and onto getting reliable access to accurate information that will guide us in taking decisive action…when the time is right. Right now, our sole goal at Raven Careers is to get you trusted information as this situation continues to develop.

This past week has been a complete sh*t show when it came to aviation industry news. Here are some examples:

**Information is constantly changing, and we will continue to update as we progress**

1. Major Airlines announce massive capacity reductions:
   1. American – 75% international and 30% domestic flying reductions.
   2. Delta – 70% reduction now with up to 80% reductions in the future.
   3. United – 60% capacity reductions with 90% reduction in international flying.
   4. JetBlue – 40% reduction with possibly more to come.
   5. Southwest – 20% reductions with possibly more to come.
2. Aircraft are being parked:
   1. Delta increased their parking schedule from 300 to 600 jets.
   2. American announced they will be parking 450 jets.
   3. Southwest has officially retired 24 older aircraft.
   4. JetBlue announced aircraft likely to be parked. No specific number provided yet.
   5. United has not released a fleet parking or disposal plan yet.
3. Regional Airline Update:
   1. The Air Wisconsin CEO has resigned his position.
   2. Trans States Airlines announced a plan to close their operation by the end of 2020. They’ve since chosen to move up their shutdown date to April 1, 2020.
   3. Compass Airlines announced they are shutting their doors on April 7, 2020 and furloughing all of their pilots.
   4. On Friday, March 20th, GoJet Airlines pilots voted in favor, by 77%, of Letter of Agreement 2020-01 COVID 19. The agreement calls for a reduction in monthly guarantee to 54 hours. Pilots were notified, by their union, if this LOA did not pass, 40% of the pilots would have been furloughed.
   5. Commutair is requesting 20% of their pilots take voluntary unpaid leave or the company will be forced to involuntarily furlough pilots due to a 60% reduction in flying hours.
4. Airlines STILL Hiring:
   1. UPS is currently hiring.
   2. Atlas is currently hiring.
   3. Southern Air is currently hiring.
   4. ABX is currently hiring.
   5. Spirit is currently hiring into a pool.
   6. Sun Country is currently reviewing applications.
   7. Our sources show Kalitta Airlines will likely be hiring by the end of this summer.

What does all this shocking news mean for you?

We’ve been getting lots of calls over the past 2 weeks from pilots struggling to figure out what all this news means for them. They’re asking; Am I secure? How do I know if they’re going to furlough me? Should I jump ship now or wait? If I do jump, where should I go? How long do you think this will last and how bad do you think this will get?

Right now, the staggering level of uncertainty is creating fear, panic, anger, and extreme anxiety at a level that’s difficult to cope with. Nothing is worse than having to sit idly by while someone else decides your fate. No one is clear on how much risk they’re exposed to and their intense fear of loss is crippling them.

To be clear, our decisions aren’t driven by achieving gains, they’re driven by avoiding loss. In this case, if you’re at the bottom 26% to 33% of any seniority list, your job is at risk. The problem is, if you quit before a furlough, you are giving up long term security and recall rights. On the other hand, if you don’t jump ship now, you could force yourself into having to compete with 1000’s of other qualified pilots for the 100’s of jobs that are available. Simply put, the math doesn’t work out and there are other options.

Right now, the biggest threat to any individual airline’s survival is debt. The larger the debt, the larger chance they will fail. That’s why you may have recently seen articles popping up criticizing airlines for their stock buybacks, dividend payouts, and executive bonuses. To keep things simple, let’s compare an airline to our own personal finances. Keeping the math easy, you and your spouse make a combined $100,000, which equates to $75,000 per year after taxes, or $6,250 per month.

• $2,100 to your mortgage
• $500 to your car payment
• $500 in gas
• $700 to retirement
• $500 to healthcare
• $500 in groceries and eating out
• $500 for entertainment
• $900 per month in miscellaneous expenses like heating, cooling, and internet, etc.
• At the end of the month, you have $50 left over for savings, or as a high debt business would call…profits!

Fast forward a few weeks, and your spouse, who makes 40% of your household income, is notified they are being laid off, effective immediately, without severance. Out of nowhere, you have to figure out how to cut all of your expenses by close to 50%. Before you know it, you’re living a pretty sparse lifestyle. Now, imagine if your company notified you, due to unforeseen economic factors, your salary also was being cut by 30%. When the cuts are all said and done, your family is having to figure out how to live on 30% of what they used to. And that…is exactly what happened to the airlines over the span of a 1-month period.

Like you, airlines have fixed and variable expenses. Items like mortgages and car payments have to be made regardless of whether you’re making enough or not. Items like groceries, electricity, and water can be cut, but only so far. Most can’t go to zero. So how do we handle this? Well, we start selling things that we own, so we can continue paying off our mortgage and other debts until we replace our income. What happens if we can’t replace our income? Then our stuff gets repossessed and we declare bankruptcy.

Think about furloughs like a repossession and bankruptcy…well, like bankruptcy. The airlines are in a massive struggle to reduce costs as much as possible so they can continue to pay down debt on a monthly basis and survive. Right now, given the circumstances, without a bailout, cutting expenses and furloughs are not enough to stop them from going out of business…and they know it. Just look at all of the recent negative quotes from airline executives like Ed Bastian of Delta and Oscar Munoz and Scott Kirby of United.

Ed Bastian of Delta: “The speed of the demand fall-off is unlike anything we’ve seen. We’re currently seeing more cancellations than new bookings over the next month”

Oscar Munoz & Scott Kirby of United: “Even more cost-cutting measures will be required soon to keep our company afloat. We continue to be among the most severely affected by the economic impact of this crisis, due to the outbreak’s breathtaking effect on travel demand.”

What should you be thinking about now?

Now that we clearly understand what the airlines are facing financially, it’s time to pivot towards answering how this will affect you. Answering questions like; Will my airline survive this? Will they furlough me? How will I know a furlough is coming? If I’m not furloughed, what will my job look like? What do I do while I’m furloughed? How long should I prepare to be on the street?

Having been furloughed twice myself, once in 2004 and once in 2008, I can confidently say the waiting period leading up was excruciatingly painful and stressful. I was left wondering; would I be laid off? If so, when? Should I stay or should I jump ship early? …it can really screw with your head.

Keeping this in mind, I want to be respectful towards the stress you are currently feeling. This means I will limit any conjecture and will stay away from fear mongering. Instead, I will focus on sharing the common signs of a furlough with you so you can more accurately read your situation. Everyone will be different given their current position and available escape routes. Navigating an economic downturn is like flying around a thunderstorm, things change quick, no two aircraft will experience the exact same situation, and your ability to accurately take in data and make real-time decisions while keeping escape routes open will keep you safe.

First things first, what are the signs that a furlough may be coming? To answer this, I will give you some questions to ask yourself about your current company:

• Is my company offering leaves of absence?
• Is my company offering buyouts to senior pilots?
• Is my company pushing for pilots to take military leave?
• Is my company cutting non-unionized employee pay?
• Is my company cutting executive compensation?

Each of the questions above leads you to knowing more about whether or not your company is in cost cutting mode. For many of you, the answers to all of these questions will be yes. Also, for many of you, these measures will not be enough to save your airline. Knowing this puts you one step closer to understanding the situation you are in.

The next set of questions you need to be asking are:

• Is my company parking aircraft?
• Is my company disposing of aircraft?
• Is my company deferring aircraft orders?
• Is my company shutting down routes?

Once again, for many of you, the answer to these questions will be yes. While the questions above regarding leaves of absence, etc. lead to shorter term cost savings, the second set of questions I’ve listed above are medium to longer term cost savings initiatives. It is very expensive to park an airplane and then take it out of storage, think of all of the maintenance inspections that need to be done. That means if companies are doing this, they think this is going to last for a longer period of time. Typically, longer than 12 months since it takes so long to undue these measures.

The last set of questions you need to be asking yourself are:

• Is training being delayed or cancelled?
• Is IOE being delayed or cancelled?
• Are my lines being cut?

This final set of questions lets you know you’re getting closer to a furlough. It’s very expensive to downgrade and furlough a pilot, and an airline will only take the above steps to keep their pilots employed leading up to a furlough as a temporary cost savings effort. These steps should be taken as warning signs because, if forecasts continue to decline, the airline will have no other course to take but furlough. After all, why would a company continue to pay benefits to 2 pilots who are working half the amount when they could pay benefits to only one and work them harder? I say this not to scare you out of your wits, but to scare you into your wits.

Post 9/11 air travel saw a demand decrease of 30% and the airlines requested a $10B bailout package. This crisis has seen upwards of a 75% demand reduction with a $58B bailout request. This situation is an order of magnitude more severe than 9/11. We don’t know if the bailouts will be approved or what they will look like.

I know this news is hard to read and I’m sorry I can’t paint a rosier picture. And yet, there are other airlines hiring, military folks have the opportunity to go back on orders, and corporate aviation stands a chance to surge out of this like post 9/11. Remember, there will be people with cash on hand, who want to fly, and want to only fly with a small group of people they know on board. For those people, corporate aviation will be a great option. If we can start changing your mindset now to a future facing model vs. a short-term scarcity model, you will be ready to react when the time is right to secure one of these positions while everyone else is in shock.

The time to prepare mentally and emotionally is now…not tomorrow, next week, or next month. If you can begin to build emotional resiliency today, you stand a way better chance than the potentially thousands of other pilots who will be left stunned, confused, and paralyzed.

Please tune into our next email to learn more about how you can begin preparing mentally, emotionally, and physically for what’s shaping up to be a really uncomfortable situation.

Additional Resources

How to Survive Disruptive Change
Are Furloughs Coming?
What Should Pilots Do In These Uncertain Times?