Let's try and explain how it works:
Your loan
It depends on each individual and the bank you borrow from. Repayments are normally done in 7 years and they could be as high as 1200 pounds per month. But it changes from person to person. I did not have to borrow the whole amount and I am paying around 750 pounds a month.
Your bond (I).
The first thing you need to know is that CTC (or your airline) are never ever ever going to pay for your training.
You paid for your training, you did not lend them 79.000 with the hope of getting it back later. As stated above, CTC are very good at making people think that money is still yours and that your are getting it on top of your salary. More about this later.
your initial salary
It depends entirely on which airline you go to (if you are ever selected by one, it is important to note that CTC cadet placement is nowhere near 99% nowadays).
- In some airlines you can expect a 6 month placement (especially Easyjet) on 1200 pounds per month net, and maybe a Flexicrew contract after that (paid by the hour). I am aware that Flexicrew is limited to a few months now, but a few years ago a CTC cadet under a flexicrew contract flying a lot could make between 22K and 35K net, depending on base and hours flown. After that, expect a permanent contract.
- In other airlines you might join as a DEP, and therefore your income could be higher. In one way or another, expect a "cadet salary" for the first 2-3 years, which is normally a normal First Officer salary reduced by around 10K a year. It would not be unrealistic to think that that initial salary is around 40K a year. However, in most airlines you would not join on a 100% contract, but a reduced 75%, which means you will be doing for instance 2 months on 2 months off in the winter. In that case your salary might be reduced to something like 32K. Flight pay and allowances might be paid on top of that.
Important: chances are that you will join an airline with the 6 month placement. More and more airlines are going down that route now, and I would not be surprised if more of them followed the flexicrew route.
Your bond (II)
Now we know how much we are going to get. What happens with the bond? Well your bond is only repaid when you start a permanent contract in the UK. Therefore bond repayments could start from day 1 (very unlikely) or never (if you go, let's say, to EZY Swiss). Normally they would start from the second year. But how do they work?
Bond repayments are nothing more than a tax advantage. This is very complicated and there is no need to know everything about it, but I can try and explain it with a few words.
1. The bond repayments are made over a period of 7 years (normally) and do not equal the exact amount of your bond (whatever it might be, currently I think is around 85K). They are higher because they are made of capital + interests.
Again, this does not mean they are throwing free money at you. It is just a way of having a tax advantage. For a bond of 79K, expect the bond repayments to amount around 13.000 pounds a year. That amount is not exactly tax free, because you pay NI on it.
2. Now imagine you were lucky to join London Airlines at 32K (on a 75% contract, no allowances taken into account). To understand your salary, you would need to take the bond off it. So 32K-13K (let's say for a 79K bond) equals 19K. So your salary will be made of a 19K normal taxable salary (Income tax + NI) + 13K (NI only).
3. This way of calculating your salary is very complex and will be explained to each individual by the airline.
4.
So how much more do you get with bond repayments? Will you get back what you are paying for your loan? Simple answer, NO. For a 32K salary, expect to get around 250 pounds a month more than if you did not have any bond repayments. For a 44K, expect a bit more than 400 pounds. As you can see, they are far from the 700-800-1000-1200 you owe to the bank each month.
How long will it take for you to pay it back
Again, it depends on the individual. But let's make the assumption that one individual is placed on a 6 month placement followed by 18 months on a cadet scale at 75% (I will asume a 35K salary for this with allowances included). After that, let's imagine a full first officer salary of 52K (with allowances included). Let's assume as well that that person owes 1000 pounds each month to the bank.
1. First 6 months expect 1200 a month. You need that money to survive, so your parents or someone will have to help with the loan. You will not be able to save up.
2. 18 months at 75%. For a 35K you could expect 2500 pounds after tax (as I said, including flight pay). Extract the 1000 pounds you owe to the bank, you are left with 1500 for rent, car and food. Let's imagine you manage to save up 500 pounds each month (no travelling, no going out).
3. 5 years at 52K, I imagine this could mean a net pay of around 3500 pounds a month. That means you have 2500 pounds a month for you. Don't change your car, don't travel, don't go out, don't move house. Save up 1500 pounds a month.
So doing simple maths, let's assume the figures posted above. A loan of 1000 pounds a month means you owe 84K to the bank (including interests). If you
save up save up save up save up for your entire flying life, you could save up:
- 3000 pounds on the first year.
- 6000 pounds on the second year.
- 18000 pounds thereafter.
So there's a point in which you could pay off the loan, and that
in this situation would be around 3 years. So 3 years is the earliest possible time in which you could pay off the loan. But this is not realistic. Because you will go out, you will travel, you will make presents, you will want to upgrade your car and move house. From my experience, if you are lucky (my assumption was a lucky one, it could be much worse) you could expect to be paying the loan back for about 5 years. Some people take less time, some people take the full 7 years.
This has a
HUGE impact in your life. Paying back the loan and possibly saving up to pay it back earlier means that your life will not be easy. You might not get the newest BMW, you might not be able to start saving up for a house until you are a bit older (and possibly when all of your friends have started buying properties or at least have a nice amount of money to put against the property). You might not be able to travel to NY every year as you might have thought or to live in a 5 bed house in London.
Please note that these calculations are not based on an airline in particular, so they would be different for everyone.
My advice
Minimize the loan. Save up as much money as you can before the course. Work somewhere and get a degree. CTC is probably (and sadly for many) the fastest way to the RHS, but it does and has not worked for
many (more than you think). If it does not work for you (and it could well be the case) all you will have is a
loan (yes, remember is
your loan) to pay back. Do not ever secure the loan against your house, do not let it happen unless you own 3 properties or your grandfather's surname is Kardashian. Think about the extras as well. Think about the cost of TR, think about the cost of extra training, think about the "what ifs" if you are not placed in the hold pool or you simply don't go to an airline...
... But even if you do, think the hard work does not stop there. Starting your TR, line training and life on the line is a rewarding and exciting experience, but some people do not make it through there either. Your learning experience does not even finish with the end of line training, it goes on forever. Do not ever think "It's done, I made it".
Good luck
