Sponsorship/CEP - Why
 

Peeps,

Something that's always puzzled me, and I'm sure some one will clear the light on this one, but why do all the airlines keep going in for sponsorship/CEP etc?

Are there not enough CPL/IR's via the self sponsorship route? Surely if there where, this would be more cost effective, unless the quality of the applicant is not up to their standard.

Someone enlighten me please.

PS

Not everyone who would make an excellent pilot can afford to self-sponsor.

By running a CEP program, which costs the airline little in the long-term (considering repayments, and extended bonds etc.), the airline can be assured that it is selecting from the largest possible pool of candidates - hence ensuring a higher overall standard of low-hour pilots.

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...proceeding below Decision Height with CAUTION...

From my little understanding, I have been told that there are numerous tax (and other) benefits available for any company, including airlines, with regards to the training that they provide etc.. How much these reductions would affect/profit an airline is anyone's guess !?!? It also appears that airlines (particularly BA) like to be able to 'mould' cadets into exactly the type of person that would be most beneficial to the company - which is ultimately as a manager aswell as a pilot. I must admit though, I've often wondered this question too, particularly since there is supposedly large pool of un-employed pilots !?? Anyone else shed some light ???

Does it realy cost them nothing?

I heard (via rumour control only mind you) that the cadets cost them 100,000 pounds plus each, and took 18 months.

Now if someone with all the bits and bobs comes to them, surely the cost of a type rating is only a fraction of the above, both in terms of time to market and investment.

I can't help thinking I've missed something here. In my business, cost is all, and every way to get them down are used.

Still to be enlightened.

Maybe BA and the likes keep their CEP schemes for the following reasons:

1. They can control the standards of both inputs and outputs in these schemes.
2. They can control the number of units processed through the system to match their own requirements.
3. Prestige - How can the worlds leading airlines not have there own CEP scheme?
4. Jobs for the boys - it certainly keeps their HR departments busy.
5. Public Relations - These schemes generate a great deal of interest, a quick look at this forum confirms this.
6. Culture of the organisation says that we must train or at least do some training 'in-house'.

BA once announced that they would lke to outsource all functions except Management and Pilots. Outscourcing is a recognised way to reduce costs, so that you can focus on your core activities, but it is arguable whether the drastic measures once mooted by BA were taking it a bit too far. However, initial pilot training is a great cost to outscource, and this has alrady been done by many airlines.

Wearing a strategic hat, CEP schemes can easily be abandoned in favour of DEP schemes, with an immediate postive impact on profits. This must seem very tempting to Management who have a bonus scheme related to profit or share prices. Especially since the effect on the bottom line is visable in the short-term, and any negative effects will probably not be visable until the medium-to-long term, often after the managers that made such decisions have moved on to greener pastures.

Where the airlines could be thinking strategically in keeping their CEP schemes is that they are prediciting a pilot shortage, and having an established scheme gives them control over the risk of not being able to find pilots. Additionally, they may think a CEP scheme is a way of keeping pilot salaries down i.e. crap terms, rather than face the price the market is paying pilots, this is particularly relevant is there is a pilot shortage.

If I was a manager in the position of being able to scrap a CEP scheme in my company, I would scrap the scheme or scale it right back. Then I would happily accept the bonus after acheiving the required profit margins/profit/cost savings% or what ever measure is used. Not to mention, the cost savings would increase the share price (the 'city' loves cost savings), and of course that means my share options are worth more.. And of course, in the future, when the airline is struggling to find pilots, or having to pay extortionate salaries to attract them, I'll be retired living of my company pension, which was generously topped up with my bonus payments... Who said being an accountant is not fun!

pj,

Good reply, emotivly put.

1. They can control the standards of both inputs and outputs in these schemes.

Agreed


2. They can control the number of units processed through the system to match their own requirements.

Also Agreed. (Don't mention this to those that where trained a few years ago and ended up doing a stint in the back)


3. Prestige - How can the worlds leading airlines not have there own CEP scheme?

True to a point, but there are plenty of examples in the past where they have closed the doors and not lost any prestige.


4. Jobs for the boys - it certainly keeps their HR departments busy.

Hmmm.


5. Public Relations - These schemes generate a great deal of interest, a quick look at this forum confirms this.

Sure. And the 29,800 rejections they send out?


6. Culture of the organisation says that we must train or at least do some training 'in-house'.

OK.

Your argument for profits are fair enough, however I suspect that it is only a matter of time before these costs are under threat from cheaper alternatives. BA is a case in point under new management, they may well buckle under city preasure.

I guess the good news for anybody out there with the tickets is that there is a concern of a pending shortage in the industry.

Good post, and I wonder as you rightly say that it's more likely to be a combination of reasons that keep the CEP going, and cost probably is one of the minor ones - maybe?

PS

All,

I once heard, from a reliable source, that in an ideal world all larger airlines would have at least a small trickle of cadets coming through a training system of their own. The point to this is that the company(s) have a training system in place so that, come any pilot shortage, they can relieve to problem to some extent (look at what easyJet are having to do at the moment).

Feeding the system with a small number of cadets constantly keeps the structure in place for periods where larger numbers need to be trained. Seems sensible to me, considering the fact that cadets do not cost much/any more than DEP's in the long run IMHO.

Cuban_8

Cuban_8

Interesting point.

Can you explain to me why you think that CEP pilots cost the same in the long run as DEP? From my maths, if the DEP funds all the tickets minus the type rating, the cost to the airline is only that (what are we talking about, say 10-15K for a small jet type allowing for the airline's discount, possibly less if they can do it inhouse). I fail to see where the savings are?

Further more, they have someone who has shown thru spending lots (and lets face it, a lot) of their own hard earned or borrowed cash a commitment to the job.

I can fully accept that by having the choice of 30,000 applicants one is bound to get a better selection, but at what cost?

PS

[This message has been edited by Polar_stereographic (edited 25 May 2001).]

The overwhelmingly important benefit for airlines which have their own training schemes, whether in-house or outsourced, is quality control. If they are in a position where they must take low-hour pilots, either through size (BA), or market position (BMC), they have to be able to be sure that their new pilots will neither fail their type or line training, nor that they will cost too much to keep on the line. There is no such guarantee with DEPs - having a licence is not the same as being good enough for, say, BA. That's why the RAF always aptitude-tests its applicants, whatever their background.
Other airlines, such as Virgin, insist on a high number of relevant hours, or lots of previous experience with a known high-standard employer (such as the RAF) to achieve the same result.
As for the cost advantages of training schemes, there isn't any! Certainly, training, as with many services, is effectively tax-free for a company, but that's at most a 40% saving on the cost - leaving 60% to be found from income. Nor is training a prestige issue. Most passengers have no idea how their pilots got to be in the front seats (although they may start asking questions if they see a 21 year old pilot exit the flight deck of a 747!), but they very much care about the safety record of the airline they fly on - and so, therefore, do the marketing men. That translates into a need for the best pilots an airline can afford, and a minimal drop-out rate once things get expensive. And so we're back to the beginning!

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Scroggs
Wannabe Forum Moderator
[email protected]

CEPs are cheaper to pay a salary to than guys with experience. We were told the course cost was £60000 (nominally) for BA. Some bright spark did the sums and including the £200pcm we pay back for the first five years, plus the lower cadet pay scales (for the first seven years) we cost £62,500 less than a DEP!!

However, we didn't have to fork out £50k in advance to pay for our own courses!!

P_S,

I must admit that I was basing my argument on a UK IT carrier, whose sponsorship programme I know a little more about. It is certainly the case with them that there is no significant additional costs attached to training their own aircrew. Combine this with the fact that they can control the process to get aircrew of the standard they want, when they want - it has to be an attractive option to an airline! At the end of the day, the airlines wouldn't run the programmes unless they saw some benefit from them.

I do fully agree with you that self-sponsorship shown total commitment and determination, and at the end of the day, airlines must get most of their crews from this route.

Regards,

Cuban_8