Unfortunately for the managers, the demographic dividend is now about to become an enormous liability for which they are completely unprepared.
With relationship models derived from a perception of
unlimited supply, airline management were able to push otherwise internal costs (like training, car parking and indeed uniforms) at employees. Study of the Ryan air model of employee relationship details how much of that otherwise corporate overhead was pushed outside the cost centre.
The Ryan air template has been borrowed by new start and established airlines alike. It was argued by former CFO Qantas Gregg, that JQ was designed to drive competitive tensions ‘across the group’ and as it was modelled on the Ryan air template, as many costs including pilot training pushed at a potential employee unit cost fell. This trend has been part of the industry dynamic for over three decades but hidden in plain sight is the message that a significant departure in the employee employer relationship had surfaced. Airlines were to have very little sunk cost in pilots: pilots funded not only their CPL training but increasingly endorsements and bonding was the norm. Airlines invested in privatised training, thereby deriving a 'profit' from self funded applicants where previously, there was a sunk cost: endorsement of their company pilots.
In demographics is destiny. A sure bet but long tails. As CT correctly alludes to, it is very predictable yet takes a long time to feed through the economy.
As real wages fall and nominal outcomes (from contract negotiations) were limited in upside, slowly but surely the ‘signal’ sent to 'aspirational' pilots was that so much cost had to be borne with limited upside (financially) that the rational participants declined the ‘opportunity’ to commit huge funds to such a pursuit.For a country with a geographical landmass the size of Australia, this strategy was always eventually bound to struggle. Qantas is without doubt the largest employer and indeed remains an aspirational goal for pilots, however without significant improvement in real terms and conditions, whether it be a pilot academy with a nice little dose of corporate welfare, or skill shortage visas unless there is a real change to the relationship model, which includes remuneration the problem will continue to grow in magnitude.
Make no mistake Qantas are acutely aware of the magnitude of the shortage, they are attempting to induce more supply with another externality; more migration. The industry is a long way from addressing the real reduction in terms and conditions that has precipitated the last three decades.
The externality borne by GA and the community will eventually see a return to mean, whereby gradual improvements will signal more supply of pilots. With airline management focused on the next KPI until operating revenue decline noticeably, airlines will do everything before doing the right thing!