Pixy
15th Mar 2014, 20:24
There is a lot of hype, myth and rumor about the amount of people leaving or about to leave. This will attempt to look at the facts, the deductions and the possibilities.
A Snapshot at Numbers
Since the beginning of September 2013, 43 Pilots have dropped off the seniority list. There are 3530 currently on the seniority list.
That is 43 in 6.5 months or a rate of 79 per year. That is an attrition rate of 2.25% per annum.
This is of course a snapshot. If 100 left in the previous 5.5 months the rate would be higher (I doubt it). If none left in the previous 5.5 months then clearly the rate would be lower. (I doubt that too).
Perhaps more relevant is the increase in numbers on the seniority list in the same time. That is 47. So 43 left and the total went up by 47. I.e. 90 new pilots joined the pilot pool.
This perhaps is a more relevant statistic: We lost approximately 50% of what we recruited.
Some of that was going to happen anyway. Retirement and loss of medical cannot be prevented by better terms and conditions.
The Economics of Replacement vs Retention.
I don’t know what the cost of recruiting and training a new pilot is but some rough numbers would indicate an average in the region of AED 250K – 350K. If you split the higher figure amongst the pilot workforce then all would get an increase of 100 AED for one month. From this you could deduce that it is preferable to train 100 pilots than giving every pilot an increase of AED 1000 /month, over a year. The focus then must be on keeping down pilot costs and recruit and train as necessary to replace those who are dissatisfied and leave.
The Methods
We can see evidence of preferring replacement to retention in current and past behavior. Salaries and allowances are raised minimally and deliberately kept below the rises in cost of living. Essentially inflation is doing a good job of reducing employee remuneration. It is stealthy but devastatingly effective. Most people view the minimum raises that have occurred as just that – a salary increase, albeit limited. But the reality is that salaries have declined over the year and employees can buy less.
The Steps of 3% up the salary scale are also often (and stupidly) seen as a salary increase. Actually they are not. They were initially designed to be automatic each year and intended to reward for service and experience. That was imaginatively explained away some years ago and loyalty and experience simply do not rate for anything on a financial spreadsheet where intangibles like competency, experience and loyalty are entirely irrelevant. One captain or FO does the role of any other, so why pay more?
These steps also mask the true picture. Yes an individual gets 3% more but that is not comparing like with like. One has to compare the same Step Level (E.g. Step 15) over a period of time. Several times our leaders have portrayed the step increase as a salary increase. We might all go up a step but if the whole scale does not shift then the company has achieved another year with negligible additional cost. Some will drop out of the scale as they leave and be replaced with pilots on Step 1 which has not moved and is more cost effective than the leaver. A minimal amount may be spent on an upgrade.
Allowances have not changed at all for some time. This includes overtime, flying pay, utility allowance, telephone allowance, various training allowances. No one could deny that these are worth less than when they last changed.
In the meantime there is an aggressive stance taken for various claims and claw backs. Claims are complicated by policy, bureaucracy, or flatly denied - sometimes on the flimsiest of excuses. When challenged, HR members often, and not so subtly, hint at this challenge possibly being detrimental to your employment. One assumes they have been instructed and encouraged to take this stance. Many back off from taking the company to task through legitimate process for fear of recrimination in other ways.
Punishment sometimes takes the form of financial penalty. Why should someone with a warning on file lose any profit share? He/She may have slipped up on a day but it does not mean they have not contributed for the rest of the year. And the concept of the company benefitting financially from an air safety infringement is a highly questionable conflict of interests that could adversely affect a safety culture.
Leave, an accountable liability on the balance sheet, is also being indirectly (although blatantly) manipulated so as to write it off at no cost. Assigned leave of small amounts in a month allows the company to ensure that a full roster up to the productivity level can be fitted into the remainder of the month. Thereby what would have been given as off days can be struck off the leave balance at no cost. Would an office worker who took leave be expected to come in on weekends to make up for the lost productivity? There once were protections against this but, like banking, these sensible regulations were removed.
This write off of leave coupled with the factoring of flight hours enables the company to get productivity levels above 900 hours a year. Watch for more of this practice when the 900 hour limit is raised to 1000.
Even the policy of sick days is flawed. One may get 20 days sick in a year but only 10 of them actually resulted in missing work. The other 10 were off anyway. The full amount goes on the sickness record and may even result in a little chat. This would not happen to an office worker who was sick Thursday to Sunday. That would only be 2 sick days. More dubious practice.
As you fly every day rest assured the army in HQ is planning how to relieve you of another dirham, directly or indirectly.
The Reality
Remuneration is going to continue to decrease in real terms. The rate may decline but the direction is clear. Every lever to reduce pilot costs will be pulled; the big ones related to salary rises, loss of license and medical claims get, and will continue to get, full attention.
The only thing that will stop the decline is the ability to recruit replacements but as other airlines and businesses are on the same path, that’s never likely to happen. Over the longer term prospective pilots will avoid the profession on a cost vs. reward basis and seek other avenues. Airlines will train more cadets and then tie them to the company. The profession will be dumbed down as new safety innovations and automation make the pilot’s lack of skill and experience less of a risk to the overall operation. The odd accident that occurs because of these deficiencies will be glossed over and be deemed an acceptable economic risk.
The Certainty
Salary will decrease in value. Work will increase for this decreased salary. There are many levers still to pull in this regard but I don’t want to give anyone any ideas!
So too will the intrinsic value of the whole package. By this I mean Accommodation, Schooling, Allowances, Medical and other protections.
Every year in the financial statements; employee costs decrease as a percentage of total costs while profits grow. You are funding the profits you see nothing of. To encourage this transfer of wealth, bonuses are paid to those who make it possible.
Because of its size the company is now afflicted by the arithmetic of scale. Consider the cost of giving every pilot a nominal (and insufficient) extra AED 1000 / month to the annual profit/loss statement: 42 million dirhams.
They will fight that with all at their disposal.
A Snapshot at Numbers
Since the beginning of September 2013, 43 Pilots have dropped off the seniority list. There are 3530 currently on the seniority list.
That is 43 in 6.5 months or a rate of 79 per year. That is an attrition rate of 2.25% per annum.
This is of course a snapshot. If 100 left in the previous 5.5 months the rate would be higher (I doubt it). If none left in the previous 5.5 months then clearly the rate would be lower. (I doubt that too).
Perhaps more relevant is the increase in numbers on the seniority list in the same time. That is 47. So 43 left and the total went up by 47. I.e. 90 new pilots joined the pilot pool.
This perhaps is a more relevant statistic: We lost approximately 50% of what we recruited.
Some of that was going to happen anyway. Retirement and loss of medical cannot be prevented by better terms and conditions.
The Economics of Replacement vs Retention.
I don’t know what the cost of recruiting and training a new pilot is but some rough numbers would indicate an average in the region of AED 250K – 350K. If you split the higher figure amongst the pilot workforce then all would get an increase of 100 AED for one month. From this you could deduce that it is preferable to train 100 pilots than giving every pilot an increase of AED 1000 /month, over a year. The focus then must be on keeping down pilot costs and recruit and train as necessary to replace those who are dissatisfied and leave.
The Methods
We can see evidence of preferring replacement to retention in current and past behavior. Salaries and allowances are raised minimally and deliberately kept below the rises in cost of living. Essentially inflation is doing a good job of reducing employee remuneration. It is stealthy but devastatingly effective. Most people view the minimum raises that have occurred as just that – a salary increase, albeit limited. But the reality is that salaries have declined over the year and employees can buy less.
The Steps of 3% up the salary scale are also often (and stupidly) seen as a salary increase. Actually they are not. They were initially designed to be automatic each year and intended to reward for service and experience. That was imaginatively explained away some years ago and loyalty and experience simply do not rate for anything on a financial spreadsheet where intangibles like competency, experience and loyalty are entirely irrelevant. One captain or FO does the role of any other, so why pay more?
These steps also mask the true picture. Yes an individual gets 3% more but that is not comparing like with like. One has to compare the same Step Level (E.g. Step 15) over a period of time. Several times our leaders have portrayed the step increase as a salary increase. We might all go up a step but if the whole scale does not shift then the company has achieved another year with negligible additional cost. Some will drop out of the scale as they leave and be replaced with pilots on Step 1 which has not moved and is more cost effective than the leaver. A minimal amount may be spent on an upgrade.
Allowances have not changed at all for some time. This includes overtime, flying pay, utility allowance, telephone allowance, various training allowances. No one could deny that these are worth less than when they last changed.
In the meantime there is an aggressive stance taken for various claims and claw backs. Claims are complicated by policy, bureaucracy, or flatly denied - sometimes on the flimsiest of excuses. When challenged, HR members often, and not so subtly, hint at this challenge possibly being detrimental to your employment. One assumes they have been instructed and encouraged to take this stance. Many back off from taking the company to task through legitimate process for fear of recrimination in other ways.
Punishment sometimes takes the form of financial penalty. Why should someone with a warning on file lose any profit share? He/She may have slipped up on a day but it does not mean they have not contributed for the rest of the year. And the concept of the company benefitting financially from an air safety infringement is a highly questionable conflict of interests that could adversely affect a safety culture.
Leave, an accountable liability on the balance sheet, is also being indirectly (although blatantly) manipulated so as to write it off at no cost. Assigned leave of small amounts in a month allows the company to ensure that a full roster up to the productivity level can be fitted into the remainder of the month. Thereby what would have been given as off days can be struck off the leave balance at no cost. Would an office worker who took leave be expected to come in on weekends to make up for the lost productivity? There once were protections against this but, like banking, these sensible regulations were removed.
This write off of leave coupled with the factoring of flight hours enables the company to get productivity levels above 900 hours a year. Watch for more of this practice when the 900 hour limit is raised to 1000.
Even the policy of sick days is flawed. One may get 20 days sick in a year but only 10 of them actually resulted in missing work. The other 10 were off anyway. The full amount goes on the sickness record and may even result in a little chat. This would not happen to an office worker who was sick Thursday to Sunday. That would only be 2 sick days. More dubious practice.
As you fly every day rest assured the army in HQ is planning how to relieve you of another dirham, directly or indirectly.
The Reality
Remuneration is going to continue to decrease in real terms. The rate may decline but the direction is clear. Every lever to reduce pilot costs will be pulled; the big ones related to salary rises, loss of license and medical claims get, and will continue to get, full attention.
The only thing that will stop the decline is the ability to recruit replacements but as other airlines and businesses are on the same path, that’s never likely to happen. Over the longer term prospective pilots will avoid the profession on a cost vs. reward basis and seek other avenues. Airlines will train more cadets and then tie them to the company. The profession will be dumbed down as new safety innovations and automation make the pilot’s lack of skill and experience less of a risk to the overall operation. The odd accident that occurs because of these deficiencies will be glossed over and be deemed an acceptable economic risk.
The Certainty
Salary will decrease in value. Work will increase for this decreased salary. There are many levers still to pull in this regard but I don’t want to give anyone any ideas!
So too will the intrinsic value of the whole package. By this I mean Accommodation, Schooling, Allowances, Medical and other protections.
Every year in the financial statements; employee costs decrease as a percentage of total costs while profits grow. You are funding the profits you see nothing of. To encourage this transfer of wealth, bonuses are paid to those who make it possible.
Because of its size the company is now afflicted by the arithmetic of scale. Consider the cost of giving every pilot a nominal (and insufficient) extra AED 1000 / month to the annual profit/loss statement: 42 million dirhams.
They will fight that with all at their disposal.