A Wiser Retirement®

253. Navigating the Future of the Airline Industry

• Wiser Wealth Management • Episode 253

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In this episode of A Wiser Retirement® Podcast, we're joined by Courtney Miller, Managing Director at Visual Approach Analytics. Learn how airlines like Southwest and Delta tackle the challenges of fleet commonality and efficiency, and how they strategize around aircraft maintenance and technical operations. We'll dissect the impact of COVID-19 on the aviation landscape, including the unexpected demand surge and subsequent supply chain hurdles. Discover the intricacies behind recent airline mergers and the looming pilot shortage that has left the industry grappling with its future course. We ponder the potential shift towards single-pilot operations and the critical role of maintaining a robust safety culture amid rapid advancements in technology. Whether you’re an aviation enthusiast or a commercial pilot, this episode provides insights into the aviation industry's most pressing challenges and changes.

Click HERE to download your free airline 401k allocation.

Related Podcast Episodes:
- Ep 234: Pilots, Maximize Your 401(k) Contributions!
- Ep 194: Delta, American & United: Who's Got the Best Pilot Retirement Offering?

Related YouTube Videos:
- Why Financial Planning is Different for Pilots
- Tips for Airline Pilots Approaching Retirement

Other Links:
- Visual Approach Analytics

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This podcast was produced by Wiser Wealth Management. Thanks for listening!

Speaker 1

Welcome to a Wiser Retirement Podcast. We believe the best financial advice should always be conflict-free. I'm your host, casey Smith, guiding you to financial freedom today. It's my co-host, courtney Miller from Visual Approach Analytics. Hello, courtney Casey, it's a pleasure to be here. So, to our non-aviation listeners, you'll know that we have a large segment of our client base that is in aviation. Most of them are commercial airline pilots and we occasionally take a podcast or two and we just dive in to, uh, the realm of aviation. So hopefully you still find this interesting. Don't tune us out just yet, and I'm sure all the pilots are turning us up as we speak.

Speaker 2

Give us a chance. There is no non-aviation population, by the way. There's the once were, there's the are and there's the will be.

Speaker 1

That's true, that's true, the ones that are fascinated by yes. So let's start with you. Tell me a little about your journey as a pilot and how you got to visual approach analytics.

Speaker 2

Yeah. So let's see, it's a long journey At least that goes to say how old I am now. But I grew up in a very small town in Indiana, very close to the Knox VOR OXI. Most of the pilots would know what that is, but the point to everyone else is that's really kind of one of the major fixes that lead into the arrival pattern OXI. Most of the pilots would know what that is, but the point to everyone else is that's really kind of one of the major fixes that lead into the arrival pattern for O'Hare, which at the time was the busiest airport. So I laid on the ground watching airplanes fly overhead very often and that led to school at Purdue University where I went through the aviation degree.

Speaker 2

Bachelor's degree ended up at Comair Airlines in Cincinnati Ohio. No, that was sacrilege. In northern Kentucky, northern Kentucky, that's right, like we always used to say. We had passengers who would say, as they're getting off, they would say we were going to Cincinnati Ohio. Why are we in kentucky? We say, yeah, calm air, if we don't get you there, we'll get you close. All right, uh, but that was always uh. So that cincinnati airport still is in. Uh, cvg is for covington, so that's covington, kentucky. It's not even in covington, but it's on the the Kentucky side.

Speaker 2

So I was at Comair Airlines for five years as a pilot. I sat right seat on the CRJ 700, primarily Did some work with the unions in analysis, or with the union with ALPA in analysis. And for those who remember Comair Airlines at the time, they had just exited a strike when I joined. So 89 days the pilot group was on strike, so I walked into that as the airline was regrowing kind of after that after that strike, and then, with Delta Airlines, entered bankruptcy in 2005. So that was fun, not recommended Zero out of 10. And then by 2007, I had finished my master's degree.

Speaker 2

I went through embry riddle. More out of this is what they don't tell pilots on, like day day one of training. There we were talking about this before the show. Look, here's what happens if your airplane catches on fire. You lose an engine, only one of the landing gear are still attached and there's a thunderstorm all at the same time, and then you get in the airplane and none of that ever happens. And it's boring, right, I mean it's that's why you're, that's why you're there, right? You could. You could do it. So it took me all of a week before I signed up for some master's classes and um, just kind of just kept enjoying myself. Um, finished that up in 2007.

Speaker 2

Uh, I did leave the cockpit to join DHL, um, in the network planning side, oh, wow. So went from the CRJ 700 into an office, uh, but aircraft 727s, dc-9s, dc-8s it was wonderful we DC-863s. So, for those who seem to remember, if you can count the number of smoke trails coming off an airplane and if you get to four, that's probably a DC-863. And we were planning those aircraft at the time. So very heavy analytics, very heavy, uh, just a ton of fun. We were looking at a map, drawing lines on a map and sending the old 727s, you know, on these lines. It was fantastic. Uh, dhl uh ended up re-shrinking so they had grown. With the acquisition of abx they they kind of shifted back to primarily an international focus, moved the hub back to cincinnati instead of wilmington, ohio, where I was able to tell everybody all about crop rotation, because the drives out to wilmington included a lot of drives through cornfields or soybean fields. Very important, um, and then um, so DHL kind of shrunk.

Speaker 2

My, I was laid off, my position was was eliminated. Great place to work, for they took very good care of us. The day after uh, the our layoff started, I accepted an offer from Bombardier to sell aircraft the aircraft that I flew. So I was with Bombardier for 11 years on the commercial aircraft side. So we sold CRJs, dash 8s and the C-Series at the time, which was a major aircraft program that many probably now know as the A220. Probably many of your listeners and clients are active on that aircraft. So I was entirely responsible for all the good things and not any of the bad things.

Speaker 2

But Delta Airlines was actually a deal that I worked very closely on with the A220 deal. I didn't lead the deal but was on the team and my role at Bombardier was very analytically driven. So I led the team that would do all the business case analysis for the airlines. So the sales guy would meet with the airlines, get them drunk and say, hey, we've got a great idea for you. And they'd say, great, what is it? And they'd say, courtney, tell them our great idea. And we'd come up with a full business case to say, hey, here's what we think you should do with your airline. Oh, and, by the way, it involves buying our airplane Right. Wink, wink, nudge, nudge. Ton of fun Most fun I've ever had early operational as a pilot into the kind of management of operations at DHL, into the marriage of operations and the business and finance world, through to kind of visual approach analytics where a lot of the work we do now is actually in the financial space.

Speaker 2

So a lot of work with aircraft lessors, aircraft investors and the airlines On the fleet side. We also do network planning, the aircraft finance world, which is this wonderfully intrinsic and intriguing world of finance that sits over the top of all this industry that we call aviation. And then a guy emailed me about a podcast and I think we're pretty well caught up a podcast and I think we're pretty well caught up.

Speaker 2

So who are your primary customers?

Speaker 1

I work primarily with aircraft lessors and aircraft investors, so you have to understand for them basically where the trends are and what's happening.

Speaker 2

Absolutely the trends, the deep trends, the macro trends, where we see traffic growing, declining, and in fact a lot of the forecasting we do, I'd say, comes down to one really key metric and that is how many people are lined up at the door to get on that airplane. Yeah, that drives so much. It drives so much in this industry. It drives so much on the finance side. Everything kind of follows that one piece of demand and what they're willing to pay, and everything stems from that one metric.

Speaker 1

So then you know the transition in our conversation. You have kind of your staple airplanes. If I'm thinking about investing, I think, well, the S&P 500 is really hard to beat. You should just buy the index, right? We talk about that all the time in our podcast. That's the average one can beat. And you think about immediately in airline worlds, the Boeing 737. I mean, this has been a staple of American aviation, even foreign aviation, for many, many years. And then all of a sudden two crashes happen and doors start coming off. So social media has taken this as the 737 is not safe and they don't know the difference between a 900 or a max or anything else. So what data do you have that says the 737 is safe?

Speaker 2

So we spend look, we spend a lot of time in the finance world but, as you would expect, the public's trust or mistrust of an aircraft greatly affects the market. So as we work with the lessors, the investors, the airlines as well, this and OEMs, this, this question comes up. But but even though just on the public side, I'm getting so many questions about oh no, I'm on a seven 37. Am I, should, I can't, should I change my ticket? And it's like they're like on a 700, like like an old 700 that's been flying around for you know, 15 years. Um, but that brand, it has been damaged. I mean, you have to, you have to consider that that seven, for for the name 737 to be even in the public's lexicon is strange and and and not a good thing, right?

Speaker 2

So a lot of the all, all of my work, comes from data at at some point. So we hear what. What really piques my interest is hearing something that just sounds off. So we were able to look at the, the NTSB filings for just aircraft accidents and we were actually responding to another chart that had been done, showing that the 737 was something like four to five times more likely to be in a safety incident than an Airbus A320. And again, remember, my entire business is built on the. That doesn't sound right. Right, and we looked into the data For the pilots on the your pilot listeners. They would probably understand a little bit more about how these NTSB reports get filed.

Speaker 2

But when you look at it, yes, there are more safety reports filed for 737s than A320s. The question is why? There were very simple reasons. One, the NTSB is a US entity, so there are more 737s flying in the US than there are A320s. Yet every 737 around the world, because Boeing is a US entity, gets reported to the NTSB, not the other A320 incidents.

Speaker 2

You dig a little bit further. You see things like numbers were included, like Boeing Stearman and Boeing B-17 accidents Tragic, these airplanes are living legends, but they should not be included in commercial aircraft safety. Right, I mean, the Stearman is a biplane trainer from World War II, right, right. So you dig in, you look at it and there were two very clear conclusions that stood out. The first one there's no difference. Right, there's no difference between the A320 and the 737. But two, and I think even more importantly, the numbers were infinitesimal. The safety of aviation is pretty nuts, yeah, I mean the idea of, you know, moving that aluminum tube through the air at 85% the speed of sound and bringing it back safely time and time and time again really kind of stuck out to us when we went looking for it.

Speaker 1

That's yeah, you can massage data to tell a lot of different stories, can't you? When you really take an independent look at it, it's no different than politics, right, and how they twist everything. Yeah.

Speaker 2

Politics is massaging, right? I mean, that's a messaging exercise. This, this is just misunderstanding, not knowing what data is missing, or not knowing that, oh well, that probably shouldn't be in there like it requires. I can't tell you how many times I've been told the data doesn't lie. Well I it doesn't necessarily tell the truth either. It still requires knowledge and nuance and deep understanding to really find that edge. And, by the way, there's a financial element to this as well, because data is everywhere, we see it all the time, and we're working with companies like blackrock and these major institutions um, and this didn't happen with blackrock, but just a great example of missing what we would call missing the trees from the forest right, where they see data but they don't necessarily understand or they misinterpret what it means and it costs a lot of money, or they miss out on a big opportunity. Yeah.

Speaker 1

What else have you seen? That would be surprising as far as what data shows and maybe what public opinion is.

Speaker 2

What? Yeah, here's a good one. You want to know what my wife has told me? To stop talking about LED headlights. They drive me nuts, they blind me. I'm the cranky old guy yelling at them.

Speaker 2

But we found some data. We found some data that shows that pedestrian accidents are going up at a rapid rate. Now you can look at that and the initial reaction is oh well, people are just on their cell phones. That makes zero sense, right? The cell phone is less bright than two headlights pointed at you, and that's usually the part of the car that hits you. So we haven't even gotten to this point yet. In society where we're, we're acknowledging that just having a brighter light pointed at people doesn't make you safer, and I know the pilots on this podcast will get that right, because as you're taxiing or turning to somebody, every pilot is always conscious to turn off those bright lights because their night vision is shot as soon as you look at it. Don't tell my wife. I told you that because she'll call me the crazy old guy who's talking about bright lights again. But I'm fascinated by things like this, where we're seeing things in the data. We're not really quite sure why, or?

Speaker 1

where With? The increase of halogen headlights, we've had an increase of pedestrian accidents they're not even halogen.

Speaker 2

The halogen ones are fine, it's the led ones. Don't don't send me down this path. Led one is the led one, but I can. Brightness is the same across the entire width right. So it's like it's like standing right in front of a headlight in the old days. I call it the old days because I'm old, but you get the idea.

Speaker 1

Bringing it back to aviation, you know, we, we look at Southwest and what Herb Keller did with the seven three Speaking of seven threes and we think about man, how genius is that? You have one airplane, you have the same parts, theoretically, for all the seven threes at least that's how it used to be and you look at Delta today and you see almost every airplane made is on that list. Have you seen any data that says that one way is better than the other? Is it better?

Speaker 1

to have ten air fleets, or is it better to you know? Should we pare that down? Should we have, you know, maybe four aircraft at Delta? You know the super long routes, the long routes, the medium and the short routes. Does that make more sense?

Aircraft Fleet Commonality and Efficiency

Speaker 2

So the answer is yes. There is data that suggests that one way is better than the other. There's data that suggests that both ways are better than the other. Of course, they're always better. Look, here's the thing with fleet commonality. You know, as Southwest was growing up, let's call it, the idea that you could do the 737 became much more capable during that period as well. But the idea that you can do more with a common aircraft type is cost savings, right. So let's just put this in terms of pilots. There are multiple bases, but if we just look at one base for Southwest Airlines, there's a right seat and there's a left seat.

Speaker 2

Right there's a there's a captain and there's a first officer, you have two. Uh, you have two bidding pools. Granted, we'll spread that out across the bases. But now let's think about something that's very expensive for an airline. Uh, let's look at training. So, for Airlines, you have two types of pilots to train a 737 captain20.

Speaker 2

Yeah, we did, you're welcome, but, but, but let's so, let's, let's consider, let's consider that let's say it's 10, uh, that they have 10 different aircraft types, that that, uh, pilots with, with separate training and and different pay rates, what happens when seniority list number one retires? When seniority list number one retires let's say he's sitting left seat, the three, yeah, yeah, everybody moves up a number, the. You have to train a new captain into the three, 50, but then that ostensibly leaves a vacancy on in first officer. So you have to train a first officer for three, 50, but then that leaves a vacancy in the seven, six, right, so you have this ladder and if you have 10 seats or, excuse me, 10 aircraft, that's, that's potentially 20 training events for one retirement, potentially, right, right, because you have that ladder. That's very expensive.

Speaker 2

Southwest, yeah, get to, you got to train the captain's replacement and the new first officer. Very cost effective to run a common fleet. However, it's not that Delta hasn't figured that out. Delta knows that very, very well. You lose your advantages on the revenue side. That's really important and not something that people were paying attention to up until about last year.

Speaker 2

Why? Because Delta's killing it. On the revenue side. Southwest stubbed its toe. Everybody thinks it's operational, that it's something to do with it, but the ability to align the proper aircraft to the demand of the market drives revenue. It drives that revenue efficiency. So now we're starting to see that shift in the industry, in the market, where people are starting to look at multiple aircraft types. Southwest is under pressure to consider other aircraft types, in part because Boeing can't seem to deliver 737s, but also because that revenue.

Speaker 2

Aligning the actual aircraft size with the needs of the market, aligning the actual aircraft size with the needs of the market. If you don't do that, you have an airplane 175 seat airplane that shows up for 100 people. What do you do? Well, you discount the rest of the seats. You just got to fill them right. Your revenue suffers, your overall revenue suffers. So it's not an easy answer. The answer really is whichever works best in the network. But it's not. You pick two extremes there southwest all single fleet and delta everything that's ever been made and the reality for most, for almost all airlines, is somewhere in the middle so somewhere in the middle is you have a large aircraft and you have like a mid-size 7-3.

Speaker 1

I feel like united's a bit that way. They have a lot of big airplanes.

Speaker 2

United has just about everything too. They aging very quickly. You know Alaska is probably a good example. You know they have a regional aircraft operated by horizon. Then they have the seven, three, seven fleet. Now they technically have wide bodies through Hawaiian. I guess it's more of that version of WestJet where maybe that's a sweet spot it's entirely airline dependent, sure.

Speaker 1

And route dependent. I mean wherever they are. And if you're in China, you're taking a 747 to go an hour.

Speaker 2

Well, yeah, they do that in Japan. Right, yeah, right. So when?

Speaker 1

you think about speaking of aircraft age. You know Delta seems to be remodeling older aircraft. It looks great when you get on. I've been on a 75. It had lay flat seats. I mean they're doing a really good job there, but it's an older airplane, older technology, versus other airlines have the 787 or they're the first to get whatever is coming out. Have you seen? Is there a financial benefit to one over the other that you've seen?

Speaker 2

Yes, there is, but it requires a lot of technical capability. So and I'm not saying this because I think you had a connection to tech ops I'm saying it because it's very, very true tech ops at delta is the world's most capable technical, uh maintenance department for for an airline. They are incredibly technical or capable. They can manage and keep a reliable fleet in the air. Luftanza, maybeansa, maybe, would be the other kind of player in there, and that's not a ding on any of the other airlines. That's how good they are. So when you have that technical capability you can keep airplanes in the air. There are two things that will kick an airplane out. Typically when we're talking about an owned airplane, that's that's chosen to be retired, to go to the desert. You hear us use the words you know turned into a pumpkin, turned into pop cans, whatever. It means all the same thing our car key chains we're seeing.

Speaker 2

Yeah, you'll see those um, there are two things that that tend to drive airplanes out. One is uh, you know, airplanes today are pretty much just really expensive mobile engine stands. The engines now are a huge portion of the value of the airplane. They burn through the the parts quicker. These are actually replaceable parts, line replaceable or lrus and and um and um and all sorts of life limited parts and that if you're coming up on a big check and you're looking at, you know, a $12 million bill, more than that, a $20 million bill to put a 30 year A320 back in the service you're going to be like, eh, she's had a good life, Um, so that'll, that'll kick an airplane out.

Speaker 2

The other is reliability. So if you really start to see reliability, dispatch, reliability suffer, the airplane will be, uh, will be sent, and this is more at a fleet level. Um, those are some of the metrics that that you're looking for that may determine if a fleet is retired. But look, I mean again, since COVID, this conversation has changed entirely as well. We used to talk about the age of an aircraft, now we're talking about the vintage of an aircraft. Right, delta airlines keeps airplanes for as long as they, as long as they can continue to use them. I mean the seven one, sevens, which aren't even that old, no, but the seven one, seven seven, five, seven sixes.

Speaker 1

Yes, those are the ones which I've always wanted to fly seven five If I, if I, if I, uh, which I've always wanted to fly, seven five if I, if I, if I could go back today, I would say seven, five is what I would, uh would bid for.

Speaker 2

Um, it's a wonderful, it's a, it's a, it's a homesick angel right, is it right?

Speaker 1

it overpowered sports car. You know it's comfortable to the ride in um. And then the, the triple seven that went away pretty quick during COVID. I was really sad by that.

Speaker 2

Well, the triple seven for Delta did.

Speaker 1

Yes correct American state LRs.

Speaker 2

And the reason so? This is another interesting part of that aircraft world. The reason why Delta's fleet of triple sevens went away a little quicker maybe than others, or had more of a pull, was because those were LRs. 777-200lrs have a very unique feature and that is they have the floor structure of a 300, which is they have a reinforced floor. So they're great freighters. So I don't even know if those aircraft were eventually converted into freighters, but uh, as you remember, during covid, when those airplanes went away, freighters were in huge demand, was value for them. The amount of money that delta could get for them was higher, right, and so these are the type of decisions that are made as you're moving tens of millions of dollars back and forth and literally hundreds of thousands of pounds of aluminum around the world.

Speaker 1

So they went out with the campers. Remember the RVs? The prices went through the roof at the same time because everyone had to have an RV and the lots had none. They weren't making any more. So triple sevens and campers became very valuable.

Speaker 2

There's a great correlation.

Speaker 1

It's not causation moment for you there um, so, speaking of boeing and vintage, uh, you know I think about, uh, just the boeing brand. Boeing has a capsule stuck on the international space station right now. I'm kind of a space geek, my I have a younger son who is too. We've flown down to a couple of SpaceX launches, which is really cool to see, and uh, did you see, it land?

Speaker 1

yes, well, I know the ones we did. The payloads were too heavy so they landed 400 miles away. Whenever they're launching people, they can't come back to the cape. Uh, okay, because because of the payload. But we hit it just right where we saw the descent and it was like this glow. It was really cool. But, um, what, you know what? What's going on at boeing? What does boeing need to do to win back public perception? I mean, do they even have an airplane right now?

Speaker 2

that that's, that's like super desirable so what does boeing need to do? How about nothing? I don't mean like they don't need to fix things, I mean like nothing needs to happen for a while. They just like let's just just stop making news right.

Speaker 2

It just seems like every time I get this question all the time from my clients like, look, we're looking at investing in these assets. What do you think about the 737 MAX going forward? Look, it's a great airplane, really like it, it's going to have value. And then suddenly we had a call. Or we look at the news. You're like huh, there's an opening in the side of an Alaska airplane and they're in the air, like that's weird.

Speaker 2

So I get all those questions again Like, oh, what should we worry about? Should we worry about Boeing? Like, look, you know, this is a production, this is a quality assurance thing on the line which, by the way, a lot of the OEMs were having at the time. This was just a very visible one, right. And then you get the whole space thing like come on guys. Like give me a break, just me personally. That's all I ask. Now we've got to strike right, um, which is not. You could make all sorts of arguments. That was boeing's doing. I'm sure there are valid arguments for it, um, but I do think that this is just more of the macro shift back in favor of labor. That will be the case over the next 10, 20, 30 years.

Speaker 1

Not that you would have data that would support this or even track this, but there's just been such a shortage of Everything. Engineering, yeah, just the people in engineering, just smart people in engineering. All of the above, just the people in engineering, just smart people in engineering. All the above that I wonder if it's it's not a talent problem, where a lot of the engineers over the years are more in tech, it designing things, where boeing is a tech company, uh, in some aspects, um, but I I just wonder how much it is just not getting the right people, uh, it's a people problem.

Speaker 2

It's so. I've heard that Douglas was to blame for Boeing's mess-ups. I've heard that hiring practices.

Speaker 2

I've heard all these things. And look, I've been at an OEM. I've been at a very large, several very large companies. It's complicated. There is no one thing. We like to use the word culture. Oh, the culture's bad. Yeah, that may be true as well, but really you're talking about kind of the whole system.

Speaker 2

So did Boeing do what they needed to do to attract that engineering talent at a time when there were really interesting things going on elsewhere spacex, just just interest? Yeah, right, um, you know, airbus is not. Their hands are entirely clean in this. They're doing way better. They've worked through this. They're having a lot of the similar problems. People don't realize, and I mean you know they should. The, the team at Airbus, I'm sure, sends a Christmas basket to Boeing. Just be like, thank you for keeping the the, the spotlight off of me. Yeah, but this is just the new reality. Airbus isn't screwing anything up. This is the new reality of this post COVIDCOVID world. You mentioned shortages. Engineering isn't the big challenge we're having with shortages in the industry, believe it or not. Right now it's technicians, it's mechanics. We're having a huge shortage of maintenance, just availability and capacity, whether that be through the airlines, through the third party providers. Airplanes are on the ground today because there's not enough maintenance capacity. We were talking about airplanes being on the ground because of lack of pilots.

Speaker 4

Yeah, Last year, two years ago.

Speaker 2

Right, this is the big. But the one thing in common is the shortage of us people Right Talent. Oh, I'll say we're talented.

Speaker 1

You think that's more of a reason for the aircraft shortage. Nah, that's different yeah.

Speaker 3

Hey, fellow aviators, before we dive back into this episode, I've got some awesome news to share. On our website, we've got a freebie just for you. Our team of financial advisors has done the legwork to provide you with free 401k allocations for all the major airlines. Getting your hands on your airline's specific allocation is a breeze. Just click the link in the episode notes or head over to pilotretirementcom. Now let's get back to click the link in the episode notes or head over to pilotretirementcom. Now let's get back to the good stuff in this episode.

Airline Industry Challenges and Changes

Speaker 2

Well, look, the aircraft shortage is entirely COVID. No, I take that back, it's half COVID, half max grounding. Right, the amount of airplanes just were not built because the max was grounded because of the two crashes, by the way should have been grounded. This was a major control, uh, flight control issue. Then we went into covid the next year. Uh, boeing airbus's production dropped way down, both in narrow narrowbodies and widebodies. And then when everybody suddenly was surprised that oh, I guess people actually do want to go places when they're allowed to, couldn't ramp back up fast, couldn't ramp back up. We actually warned about that. In fact, I wrote an analysis for the air current a few years ago this was in, I think, may of 2020, saying we're not going to have enough pilots because we won't have the training capacity to move them back through the system. Yeah, and that was true, although we just didn't have enough pilots for several other reasons. Same on the aircraft side.

Speaker 2

That supply chain to build an airplane is insane. It it's not the OEMs, they're the assemblers. They design, they assemble. There are lines just probably a dozen tiers of suppliers down that list, all the way down to the little fasteners, and they're doing whatever they can to earn their 5% returns, operating returns, and Boeing. At the top goes yeah, you know what? We're not going to make airplanes for a while. And then, oh, and now we need to make three times as many. Go, go, go, go, right, right, it's a major, it just and it just doesn't happen. And that's that's really where we are in the aircraft shortage.

Speaker 1

So kind of shifting gears a little bit. You know we had the DOJ blocked the Spirit JetBlue merger. We're seeing Spirit signal last week or I guess this week that bankruptcy might be an option for them, but yet we see the Hawaiian-Alaskan merger as being somewhat celebrated. Do you have any insight as to what's happening there?

Speaker 2

I try not to guess what judges are thinking, but I do imagine that Spirit will file for bankruptcy. It looks almost imminent, probably before you publish this podcast. I hope they don't, but it looks very difficult for spirit and I hope spirit passengers that are stuck at airports or are are having issues. They they're not going to turn the airline off, but I hope they send pictures and they and they send it to the judge. Who said this is for you spirit passengers Like yeah, screw you pal that. Who said this is for you spirit passengers Like yeah, screw you pal.

Speaker 2

That being said, when the deals were originally announced in fact well before Alaska Hawaiian was announced we wrote research saying those two airlines should get together. We were called crazy. It was one of the first times I was called crazy for analysis and not the last no-transcript really talking about we just liked the combination of those two airlines more from a cultural perspective and how they actually can combine and add value, not just for the investors but for the communities. Right, hawaii is intensely important to the local. Aviation in Hawaii is different from any other state and Alaska. Alaska is not based in Alaska, but the state of Alaska where Alaska Airlines is prevalent is, unlike any other state in a different way. So the combination of those two worked JetBlue spirit just never liked in the first place it just didn't really work. It was a play for airplanes that now JetBlue was like, oh we don't even want the airplanes that we've got coming, and so things changed and and it, it didn't. It didn't fit the way that Alaska Hawaii fits.

Speaker 1

Maybe Spirit Frontier should have gone through after all.

Speaker 2

Well, should I mean, whatever the amount of money that JetBlue was trying to throw at Spirit which, by the way, at the time, to give Ted Christie credit said we don't think this will get DOJ. And JetBlue said here's some more money Shut up. And he's like okay, we'll take it to the shareholders, and it was so much that they said okay. And then Ted and team were all in on making sure that they had the best chance of that. And now here they are with the challenges that they have today.

Speaker 1

Right, so you and I both had careers at, short careers at the regionals. Well, I was there 10, 12 years total. That's way longer than me. Do you see that model kind of disappearing over time? Do you think that everything just kind of gets absorbed in by the majors? We already have regionals owned by majors again, which they were that way a while ago. Then they shed them all and then there being a ton of these little regionals running around, and so now Delta has what Endeavor? You still have SkyWest I call them SkyWorst. You still have SkyWorst floating around, sky worst you still have sky worst floating around out there. Somehow I don't know how they managed to survive. There's a lot of things going on in Utah I have questions about, but yeah, so during my time it was sky worst.

Speaker 2

I flew for comedy air. There was chicken taco.

Speaker 2

Um, yeah, look so let's put the regional space into context. The, the, the, the regional airline industry was way smaller than it is today. It wasn't on a cpa agreement, so that means it wasn't a here's money. Go fly. Yeah, I'll fill it with passengers and I'll get the revenue from that. You just go? You just go fly. It was we're partners. If, if I fill my airplane, I make money as a regional right. It was a more yeah, excuse me, in the pro-rate style agreement, but it was much smaller. Turboprops. Uh, scope clauses made the regional industry as big as it was. The scope clause that was at 50 seats made way too many 50 seats.

Speaker 1

And that way too many 50 seats. The big, big airline unions basically dictate what size airplanes could be outsourced.

Speaker 2

Yeah, right, but it makes, and it's what a scope clause is In any contract. A scope says here's what this contract will cover. Right, when we say scope clause in aviation, what we're generally talking about what's excluded, what are some exceptions to what we, the union, will fly. And these scope clauses are with the mainline carriers. These are the ones that matter, because they are writing out the exceptions of what can't be.

Speaker 2

So it used to be 50 seaters. Because of that, the 50 seat jet, by the way, was a revenue machine. People forget this. Yeah, it was a revenue machine, a yield machine. Those things were insanely profitable and I know people are shaking their head right now, but they've only known that airplane in the past 15 years because when Delta and it was really through calm air originally who who started the 50 seat jet when they could fly Cincinnati to Des Moines and take those passengers that were sick of going through O'Hare, yeah, and one, stop them through Cincinnati to wherever they went on a jet. Are you kidding me? Yeah, they paid a premium for that, right, they paid. Or two to prevent two stopping and one of it being on a on a turbo prop. The problem is, when everybody has one of those, the premium goes away.

Speaker 1

And then it flips to where it's the most hated jet because it's so tiny. Well listen, they don't remember what they were flying on.

Speaker 2

I have been on a 767-300 listening to passengers complain about how small the airplane is. I am not kidding, it is all relative. It is of my opinion that every airline should retain an EMB 110 Bonarani. Just set it out on the ramp. And when people complain about the size of their airplanes, they're like oh, I'm sorry, this isn't your flight, that's your flight over there. And then see what they say right, the 50C jet was man, it was the business jet right At the time, in the 90s, premiums were paid. They were not turboprops.

Speaker 1

Now they stink because we're not tooling around on shorts 360s. We're reinventing them with a first class and less seats and trying to get a premium out of them again in a different configuration, but yeah.

Speaker 2

So the point of the whole regional growth and expansion happened as a result of those scope clauses.

Speaker 1

We're on the backside of that and, by the way, the bankruptcy, the scope clauses got so big because the mom and pop airlines, the big majors were in financial trouble.

Speaker 2

Yes, that was the latest.

Speaker 1

They were using the credit of the regionals to get more regional airplanes.

Speaker 2

Yes, absolutely. They were using the credit of of the regionals to get more regional airplanes. Yes, absolutely, it's so. They were using, like, skywest balance sheet is probably one of the more valuable things in aviation at the time, simply because of their ability to leverage that to to add lift at a time when the airlines were literally in bankruptcy, right, um, well, they're not in bankruptcy, right. Well, they're not in bankruptcy anymore, they're actually doing quite well.

Speaker 2

So we're seeing the I'll call it the decline of regional airlines, but not to zero. This isn't going to go away. This is going back to kind of where it would naturally be. Remember, too, we were dividing regional fleets by six airlines yeah, northwest, continental, oh, airways, I guess, and then hell, twa, right, I mean seven. It just keeps going. So you know, 50 seater across seven airlines turns out to be a pretty good 100 seater across three or four, right. So we're seeing that re-rationalization. But the idea and I've heard it suggested that the regional airlines will be absorbed into the mainline carriers. There's a reason why I don't think that will happen, and that's the same reason that regionals did so well in the first place, and that's the seniority list and scope clauses I don't think mainline pilots are interested in having, in just absorbing regional pilots onto the seniority list. If they don't do that, if they don't integrate the seniority list, well then you're wholly owned and there's no difference.

Speaker 2

So I think that's where I think it will continue. It will be a 70, primarily 76 seat fleet. We know exactly how big it would be. The scope clauses tell us so and that's where it's going to be for the next 20.

Speaker 1

We always hear about cost structure. It's a lower cost structure, but is it still? A lower cost structure. I mean my first job flying. I think I paid $17.80 an hour to fly at Beach 1900. And it cost me more to get to work than what I was making in the first couple of days. And so I look at it now I'm still getting. I'm 46 years old.

Speaker 2

I've been out of this. That's old man.

Speaker 1

I've been out of this for 10 something years, right, and I'm still getting postcards because I have a CL65 type rating. I'm still getting postcards offering me $100,000 signing bonus to go fly at a regional airline.

Speaker 2

I got phone calls.

Speaker 1

Where was this money in 2004? In 2004, I was happy to have the job. How is I mean? Is it just more of a market share thing now, you think, Because it can't be making tons of profits on these runs with these paying pilots so much more?

Speaker 2

Well, listen, it's revenue. Yeah, so we didn't talk about why is Spirit having so many problems? Why are we talking about Southwest as not being as great as they used to be? And this is part of it. They don't have the ability to spread airplanes that are not too big into smaller markets and actually drive revenue into the system. Right, these are things that are really benefiting the legacy carriers now, so that's so.

Speaker 1

That's one, but I guess you're out of Columbus, georgia, all the essential air routes. You know Columbus, georgia, macon I don't know if Macon has air service I think it does now actually, but Asheville might be a good, good example. You know Columbia, south carolina, all those southern good southern cities that that have a good population, but they, you're, what you're saying is you still just get them to the hub and then we can upcharge them on on, uh, you know the next flight it's well, it's that or nothing.

Speaker 2

Um, if you're taking an international flight and you're in Savannah, you fly?

Speaker 2

a mainline flight to Atlanta, but United's no dummy, they're not going to let that international traffic sit, so they're going to put an RJ to Newark and to Dulles because they have wide bodies jumping the Atlantic. So you start to see how these networks work and play out the value of the regional jet in that context. Simply because you need an airplane of that, of that size, it's not, it's not going away, but it's it's also not going to be what it what it was. The cost advantage is largely leveled out. The pilot shortage, the weird, very acute pilot shortage that we had two years ago, largely broke that model. I mean, I remember they basically doubled regional pay just to get anybody in the door.

Speaker 2

Now those memories are long right. So this is why I don't think regional airlines will go away, simply because airlines know if I have a problem again or if pilots and, by the way, this pilot shortage is not over the reason for the last one is over, but we're in a longer term pilot shortage. These airlines know that's how I make sure that I have a pipeline that goes all the way through, you know, eventually to my wide bodies at the top of the list.

Airline Industry Service Trends and Revenue

Speaker 1

Speaking of regionals, you think about how service is so different a regional jet versus maybe a mainline carrier. It's probably better than it used to be. But if you take that a step further and you think about Delta's charging premium for their first class seats right now and I don't know that I mean I've been on a few flights where they had real plates, Uh, and then I took that route again like six months later and it was like here's a snack box, so I'm not sure what's happening there. Um, like they tried something didn't work. Now we're just back to snack boxes, like it's COVID.

Speaker 1

But what do you see as far as trends as level service? Do you think Delta could go all out and really upgrade a first class to like an Emirates category and be able to charge a super premium that you could extract people maybe out of the private markets? I mean, right now in Atlanta, you can only do this in Atlanta and LA, but they have PS Atlanta and where I think it's $1,500 a person, something in that range you can go into basically the private side of the airport. You go through security with, you know, right there. So you're on the.

Speaker 1

Porsche and yeah, well, I don't know if it's a Porsche. Delta has a slightly different service, uh, that that uses that porsche, and I think their private screen might be somewhere else, but I'm an expert on that. I just know this is a third-party company that will connect you with any airline. Oh, out of the line, you pay, add 1500 bucks to your ticket, you can go, you can go. You sit in this nice lounge and then they will drive you to your gate. You go up the ramp like the pilots and you get into your airplane. You will never see the inside of Hartsfield. They'll handle your luggage going and coming for $1,500 per person.

Speaker 2

Wait, so you're telling me for $1,500, I never have to see the inside of Hartsfield. Correct, I'll pay three grand for that.

Speaker 1

No, I'm kidding so you know, and obviously it's not in service. If you're going from here to Jackson, wyoming, well then you don't have it on the other end. But the idea of you know, would people pay a super premium for a service that's more robust, like that and including the cabin service? I mean geez, on Emirates. I see some of these pictures and it's nicer than most people's apartments in some of those planes.

Speaker 2

Yeah.

Speaker 1

Do you see a trend toward that? Or are we just going to pay you a premium for an upgraded seat and a little nicer peanut?

Speaker 2

Well, they don't even do peanuts anymore. Really, that's true. So, listen, I mean a few things going on here. One, emirates and Etihad and Qatar and Singapore. They can do that because the flights they're flying are very, very long and those very, very long flights, that premium is more likely to be paid. Now, delta also flies very long flights. United also flies very long flights, but not on their entire fleet. Yeah, so to outfit an entire 350 fleet, which is Delta's longest range airplane at the moment, with suites, more money can be made by having a couple business class seats than a suite.

Speaker 2

It's all about real estate. The only thing you need to think about airplanes, it's real estate. How do I divide that cabin up and make the most money? That's why Spirit exists, because they at the time made more money in that offering. They were able to divide the real estate up in that way.

Speaker 2

Right now, there's that shift back to the premium, but there's something else that's very important in airlines right now, especially in the United States. It is something that I had no idea even existed to this level until I left the cockpit, and that is lounges and credit cards. The legacy airlines today, by and large, are credit card companies. They're credit card affiliates. They will make some money here and there on the actual operation of the airline, but by and large the money and cash that they're receiving, that makes them profitable.

Speaker 2

I'm not saying they're not profitable, but there's a huge incentive and revenue base towards loyalty credit card points and when you start considering those first class sections in that context it makes the decision a little fuzzier. What are those worth? What are points really worth? And right now they're worth a lot. American Express paid a lot of money for a lot of Delta points. Then we started hearing news stories about too many people in lounges and the lines were too long. So there's this whole supply demand on that side as well. But that has been one of the largest shifts in airlines, particularly network airlines, over the past really 10 years has been that shift into loyalty and really going I remember non-revving in first class Is that?

Speaker 4

crazy, or what?

Speaker 2

No way Not today.

Speaker 1

No, in fact, most of our clients who could fly free on Delta, most of them are buying seats now. Yes, they such a good job, airlines have done such a good job of filling that empty capacity. As an employee, that biggest perk of why you might work there and get paid less not talking about the pilots, necessarily, but just regular, your regular workers uh, not not really panning out so much unless you get the weird flight, you know, the red eye or the early morning flight. Europe's a little different because people don't decide to go to europe at the last second. You know it's usually that that's. That's a little different game. But but yeah, that's interesting, it makes sense. I mean, the longest flight in the us is going to be five hours, right, yeah, and you might have an a350 going to washington and then on to washington to asia, but you, you have a problem there and that Atlanta to Washington flight, that would not be profitable to have that kind of configuration, most likely.

Speaker 2

And we don't see those anymore either. When you say Washington, I'm assuming the Seattle version for Delta. Yeah, when we see Y-bodies flying within the US, hawaii is an exception by and large. Now they are pretty much only repositioning flights, so we're just moving. Now they're sold and there are passengers on them, but they are moving airplanes to where they want them to fly the long haul international. The amount of domestic Y-body flying today again Hawaii accepted is much less than it was.

Speaker 1

I'm headed to San Francisco for the Schwab conference coming up next month and it's on an A320. San Francisco five-hour, half-hour flight from Atlanta and flying on just a plane.

Speaker 2

These airplanes are so small I know, I know right.

Speaker 1

The same plane. I'd fly to DC in or down to Orlando. Actually Orlando, I think, has bigger airplanes. But you get my point is that you think it'd be something larger but it's not. But it also depends on load factor too, I guess, because when we went to Jackson it was a 7.5. But that could be for performance too, who knows.

Speaker 2

Well, and we sold the C-Series in this way as well. When you're talking wide bodies and narrow bodies or for the non-aviation crowd we'll call them twin aisle and single aisle airplanes Right, they don't scale like you would expect. Wide body airplanes are built to carry fuel a lot of it and they have to have very heavy infrastructure to do that. And then they have to have the engines to get all of that off the ground. Right, you don't. That's not really economical. On the short, on the short sectors, it is very likely that two 150 seat A320s costs less than one 300 seat A330. Yeah, right, so it's not necessarily economies of scale. We call that fragmentation, where the smaller airplanes are coming in and actually more economically offering multiple flights, and then you get the benefit of increased frequency and option and all that.

Speaker 1

Yeah, multiple flights, and then you get the benefit of increased frequency and option and all that, yeah, so, speaking of uh, wide-bodied, narrow body, uh, that goes reminds me of you know, the pay scales. Pilots get paid more if there's more seats. Uh, we are in a time now where pilots are making more money than ever. I'm my firm's a direct beneficiary of that. We typically onboard three to four new pilot families every single week doing financial planning for them, and my team I have an aviation background, obviously. My team has all of my knowledge. We have like Wiser Aviation School, so Shauna and Missy and Michaela and William and Grace all understand aviation terms and you know, in fact, I was in a meeting this morning. We meet every Monday, we do a standing meeting and we quickly kind of go through operationally what's happening. Is anything stuck anywhere?

Speaker 1

In the afternoon I sit down with the planners, we go through all the plans together, make sure everything makes sense of what we're going to deliver, and someone again, we're not an airline Someone goes hey, there's not as many green slips at Delta right now. We've noticed the pilots are having a harder time picking up green slips if you're on the more junior side. So we need to take that into account in our planning. When we're telling them, hey, go pick up some extra trips to pay for this or that, you've got to get rid of this debt or whatever the conversation is, and I kind of smirk, it's like man, I actually feel like I've done a good job of bringing non-aviation people into our world to understand what it is that we're talking about. We have our own language, that's for sure.

Speaker 1

How many financial planning firms are going to say you know there's less green slips at Delta right now, but you think about what's happened. You know the contracts came at a time the airlines couldn't afford really not to make a deal. So what do you think? That this is going to hurt the pilot groups in the long run? Do you think there's going to be givebacks eventually? You know what's your take on. You know I I often think about american and how much debt that company carries and how like I feel like just it's. It's kind of like that person has a really good job but they have tons of credit card debt and tons of payments for really nice things, but they lose that job the next day. They're screwed right. So what that?

Speaker 2

sums up American airlines. I couldn't have said it better myself.

Speaker 1

So what should we be worried about? Uh, when it comes to these new contracts going forward in the union's ability to um, to to help with pilots, Cause I will say I've seen, I've seen pay go up, I've seen quality of life come down. They have more money. Delta, put a guy from Pinnacle or somebody in charge of their scheduling Everyone's complaining about scheduling because we literally have a guy who wrote the script at a regional airline. Go to a major and be like this is the new life, guys, and dinner and a movie goes away and all the cool stuff that you could hide out, right, and you can't hide out anymore. So where is this taking us? You think dinner and a movie goes away and all the all the cool stuff that you could hide out, Right, you can't hide out anymore. So where is this taking us?

Speaker 2

you think so so listen, you know, if the biggest concern of a pilot group is is scheduling, which is not nothing. I want to point that out.

Speaker 4

That's part of your life, yeah.

Preparing for Aviation Industry Changes

Speaker 2

But things are pretty good from a contractual side, right, you can like they're. As far as I'm aware I don't know anything that's going on they're not breaking the contract and saying grieve it, screw it, grieve it, right, yeah, so these are things that get worked out, yeah, and the airline's looking to optimize. But look, I mean for pilots going forward. You know, I think I was asked on the Sporty's podcast and we do our own podcast and I say this time and time again. I was asked do I think the pilot profession is overrated? And my answer right now is yes, I think new pilots coming in have no idea what this career really is. We're talking like you're not even measuring upgrade times in years anymore, like they were measuring them in months. Right, right, they couldn't get first officers into the left seat fast enough. They couldn't get the time in the right seat to even get them to the left seat and they were losing captains so fast they couldn't even get them in the right seat, right, right. So that progression and the movement up the seniority list on the mainline side is is insane. Now it has. It has reverted back to kind of a more normal state.

Speaker 2

But I would caution pilots today in looking at that, as we always do, with our short memory span, looking at that and being like, oh well, things will be great. Things will not always be great. You will very likely experience at least one round of furloughs Not that you'll necessarily be furloughed, but a seniority list that moves in the opposite direction is a terrible thing, right, it's just. You know, you're actually moving backward in life quite literally. Right, be ready for that, because that is a very likely we're talking in the next 20 years, 10, 20, 30 years of a career. It's not going to be like it is today and it's really good today, and just be aware of that. And it's really good today, and just be aware of that. That doesn't mean bankruptcies. It could mean a potential strike. Labor is much stronger and that's part of the upside may come with more challenges in terms of that. Challenges, um in in terms of that. But you know, I would say be ready, be ready for be aware that, that this is a good time, and be ready for the challenges. And what this is all boiling down to is get yourself a good financial planner. Thanks for the plug. Yeah, you just gotta be, you gotta be ready, but ready, but it's true.

Speaker 2

Right, we're saying this on the aircraft side as well. Right, we have investors coming to us saying where do I find the edge in the aircraft market? And what we're telling them is the edge is in the knowledge. Right now, the edge is in the people. I don't mean employees, I mean people who know the technical side so much of an airplane. Now, the value of an airplane is defined by the engine. Who are the people who really know the engine? They're probably a tech ops right now. Right, it's the exact same thing on the pilot side. Really, the knowledge is going to be more and more valuable over time, and with that comes the context that hey, talk, talk to any, talk to any gray hair captain. He will tell you about, or she will tell you about, times that were not great. And listen to those stories. It's never going to be like it was in the past, but just be aware of the types of things that you're going to go through and it's not all up and to the right.

Speaker 1

Yeah, no, very true. You know you think about some things that threaten pilot jobs. Obviously, alpa. If you go to their website, you'll see they're very anti-single pilot operations. You go to their website, you'll see they're very anti single pilot operations. You know we we're going to have self-driving cars here faster than probably many would like. What? What is your take on single pilot operations? I mean, I would think that the technology has to already be there, right, if we're flying drones, basically, that can do everything on their own. For the most part, airplanes do a lot on their own already. Everything on their own, for the most part, airplanes do a lot on their own.

Speaker 2

Already it is. The technology has been there for probably 20 to 30 years. Take that as good news or bad news, whichever right, because it hasn't happened yet. But but let's so, let's, let's consider. Look things like the pilot shortage. Okay, well, first of all, for ALPA to say we don't want to lose half of our workforce.

Speaker 1

I know exactly. Come on, what else are they going to say? And all those people paying dues?

Speaker 2

Yeah, well, they can be.

Speaker 1

This is what they have to say Take it from a, just take it from a safety standpoint.

Safety and Training in Aviation

Speaker 2

We know that the most, uh dangerous, the least safe part of the chain of aviation is kind of that squishy bit in the front. Yeah right, um. So we kind of know that. And that's not a, that's not a slam against, uh against pilots, it's just we're the weak link in in the system and that weak link has led to again circling back those infinitesimal numbers. So even we're the weak link in the system and that weak link has led to again circling back those infinitesimal numbers. So even though we're the weak link it's infinitesimal, but we are the weak link in this. We know the technology has been there. What I would say is it could happen. It's not going to happen at your airline. I'll promise you that. There's no way the airline that exists today that has any union. There's no path outside of Chapter 7. I mean, not even a Chapter 11. No union would allow that. But watch for a startup airline to do it. That's when it happens, right. But in order for that to happen, it has to be the FAA.

Speaker 1

This all gets back to safety and I know Maybe it starts at like a Cape Air. You know where there's single pilot, yes, and now it's just the automation that's backing up the Cape Air pilot, correct, yeah.

Speaker 2

FedEx on the cargo side, right? Yeah, absolutely. You know, single pilot with kind of a remote observer. I'm not saying it will happen, but from a safety perspective and the idea is well, when you need two or four eyes, I guess, and and we always need two people in the cockpit and on the flight deck, I would say, be careful of that, because the amount of near misses that we have had, yeah, in the past couple of years, have suggested the opposite.

Speaker 2

Now, this isn't a statistical analysis, this is a public opinion analysis. If things happen and it's seen that unqualified pilots or complacent pilots or whatever are things, it doesn't take much to get that snowball rolling. So what I would say to pilots the most important thing you can do is not die. Stay, be safe, be a really good pilot, because there's no reason other than financial and the finances aren't what's being decided in that. It's the people who get on the airplane and if they feel safer behind two pilots, then there will be two pilots on the airplane, so make sure that you are safer with two of you up there.

Speaker 1

You know, not that I don't necessarily need a comment out of this. I just have a lot of insiders, and my insiders that are in the training departments at these major airlines are telling me that this DEI hiring has just been a huge threat. And when I went through training, you get eight sims. If you had to get nine sims, then you were really nice to somebody. If you went to 10 sims, you knew the CEO or maybe you were related right. Otherwise you got fired. There's people in my class, both when I was at Colgan and ASA, did not make it through training and it was like I'm sorry, you can't do this, you're out. Okay, I have a story, I won't tell you which airline. I have a story of a person who's had 25 Sims. 25 Sims Also shows up to work male, dressed as a female, and this person still is flying airplanes.

Speaker 2

Oh, is this like a recent thing? Yes, Ah interesting.

Speaker 1

Yes, so much so that this person is captains will say I'm not flying with this person, like out of dress code, wearing the women's uniform. This is not acceptable. And so HR is like, oh, we can't fire this person, so the he, this, this person, goes home without pay. I mean, goes home with pay. So it's like a whole thing. Oh, if you don't like me, that's great, I'm just going home, they're gonna pay me for the trip anyway, and so it.

Speaker 1

I could have done that this whole time. This whole time we could have been doing that, right, we could be doing running our companies, and, and we, we could have been collecting this other paycheck. We just have to show up every four days, piss the captain off and go home, right, but but my point is that that's one story from an insider. That story is real and and. But there's others that are less severe. But we're we're, we're checking these boxes, and there's a theory that some of this stuff is happening because, even you know, white guys like us are screwing things up too, because some of us shouldn't have made it through training either, and so your point is well made.

Speaker 1

It's like we need. We need to ensure that we do what we're supposed to be doing as pilots going forward. We need to make sure we're doing our job better, right, and I know, and that, and that goes beyond. That goes beyond air commercial airline aviation. That I'm in, I'm in, I'm in, um, you know, aopa land. Now, right, I'm, I'm doing, I'm doing, uh, flying around in a cessna 182 and the stuff that I see is like holy crap, did that guy really just do that?

Speaker 2

Yeah, well, listen, just drive around my neighborhood.

Speaker 1

It just goes across the whole spectrum of aviation. But yeah, I just think that we've lost our way here a little bit with a lot of that and it'll come back around. I just hope no one dies in the process.

Speaker 2

So there are a lot of anecdotes out there. We've actually done some studies on this, on safety in training, over the past really 10 years and what's driven these studies really is the 1,500-hour rule. Now the 1,500-hour rule says that you can't be an airline pilot as a first officer at a regional until you hit 1500 hours. The problem with that is is that you graduate graduate as a commercial pilot 250. So they're like go do something else for 1250 hours, we like to say flight instructing program.

Speaker 1

It dropped to a thousand in that.

Speaker 2

in that case, so there's a lot of studies on the training and okay, has that rule, which was put in place after the Kogan incident, the Dash 8 crash in 2007, I think Right, and has that made flying safer? Now we have not had accidents. However, what we've found is that the pilots who have the 1500 hours are having more training failures. They're taking longer and more retraining simply because there's a lot of time between the last time they went through training. Right, right, we're actually taking them away from the training environment and then saying oh, 1500 hours.

Speaker 1

We now dub you magically able to go sit in the sim and they're having trouble in the sky on nice sunny days, not experiencing really any learning events right Now that.

Speaker 2

all being said, that I think was a pilot study which was done in the 2010s 2016, where they really kind of went back and found okay, which pilots you know, they went all the way to 3,000 hours and how much just experience in terms of hours. How does that compare to recency of training, in effect, and what the 1 hour rule is doing? All that being said, what we found isn't that so that would flow into the regional airline space. What we found is that, or what that study found, was that it's not actually producing less safe pilots. We can find anecdotes of flying with real idiots I was probably one of them a few times. Idiots, I was probably one of them a few times. What's happening is the failure rate has increased dramatically. So the system is working. The system is working at that level to kick out the ones that are not proficient by the end of that training by and large.

Speaker 2

By the way, a lot of those systems were put into place after the Colgan accident. That Colgan captain and first officer both had over 1,500 hours anyway. It was ridiculous that that was ever pointed out, the point being that, even though you could look at the 1,500 hour rule as producing worse pilots that that would enter the profession at that point, simply because of the time they had to leave that training atmosphere. The system still caught and punched out more. It's more expensive to do that.

Speaker 2

Now. Consider from the regional space, a shrinking space. These airlines were going through bankruptcy at the time. Republic Airways went through bankruptcy, mesa Airlines went through bankruptcy. Several of them shut down and they did not. It has not, at least in any major fashion, shown any degradation in kind of the quality of the controls of the training, of the sim training I'm talking about. So the system worked and it did what it was supposed to do to make sure that the pilots who were now failing at a higher rate, ostensibly because of the 1500 hour rule, were not allowed through the system if they weren't proficient. At that time the industry and those airlines went through the worst pilot shortage that we've ever experienced since probably World.

Speaker 1

War II or Vietnam. So during that time period you start overlooking things.

Training, Safety, and Aviation Concerns

Speaker 2

So that's what you would think, but the failure rate also increased during that time. So that's what we expected, and that was my expectation that when these airlines get to be where their survival is in question, that some things could slip through the cracks. We have not seen that happen. I'm sure there are instances. We have not seen that happen at any at at any scale, which I think is really a testament to just how strong the training system is.

Speaker 1

even with the self-inflicted 1500 hour gunshot to the foot, um which is and I know that's controversial to say you're, you're making uh kind of my case of why my family would never fly on a foreign carrier.

Speaker 1

Well, potentially, although they have I go back to. I go back to, like that air france uh flight over, was it the uh atlantic that that uh that crashed and delta had the same similar problem, but delta was able to solve it. Um, their plane and everybody lived. It was a non-event. It didn't even come out that it was an event until after Air France crashed. It's a different training environment. So what you're saying is my insiders say, hey, there's a lot of problems, but you're saying that they're doing their job, they're catching it. They're saying, hey, you got to go back to retrain, you got to go back to retrain.

Speaker 2

So because you're not doing additional failure rates, or you're right, is that? Is that what the anecdotes are so glaringly like? They're so loud? Right, they're, they're, they're so obvious when we have these, these specific anecdotes. Systemically, though, we have not, well, I mean, we haven't had, we haven't had accidents, but we have had incidents, and these concern me Right, right, the uh, the Maui incident, I the yes, that when those two guys were in the chief pilots office, they should have just slapped them I or worse, um yeah at least yeah that triple seven coming off the runway there in maui and it almost, uh, ended up in the ocean, because almost end up in the water people were paying attention, basically.

Speaker 2

But then you know, we've had these southwest nighttime visuals that got too low or were descending into the wrong the wrong place, right, these are the type of things that you would start to see when you had rapid seniority movement, and not because people were being paid more and moving up the seniority list. But when you have people, when you have multiple crew members with little experience, as was the case on the triple seven right in in hawaii, we would start to see things like this. That doesn't mean the other things aren't true. It's that's what we would look to on the on the systemic side. That that's been my concern. Look, it's the whole swiss cheese approach. You know, you, you, as of now, a layer has has it. We have real concerns on the air traffic control side. Right, for the same reasons, by the way, for the exact same reasons. Just, the relative seniority has really dropped. Covid had a lot to do with that. Right, all the different movement. So we have strained the system. Right now, the biggest strain is on the human safety component Because of the incidents that we've seen. Covid has a lot to do with that. The shortages have a lot to do with that. So, again, as time progresses without it, these things right, guess what. Every day that we go without an incident is a day more of experience, that everybody has right, and we're moving in the right direction.

Speaker 2

For those on the flight deck I would say make sure that you're doing everything you can Like. Look, it's your own butt and it's the people behind you, right, literally it's your and their lives. Obviously it's the people behind you, right, literally it's your and their lives. Obviously everybody's doing everything they can. But make sure the culture of safety continues, because if that starts to slip, the public will say why do I need two of these guys? Come on, I mean, I got a car driving with nobody in it, so can I just kick one of them out? Oh, I'd save somebody off my ticket too. Right Today they wouldn't say that Like no, no, no.

Speaker 1

Yeah, yeah, okay, well, cody, we could probably keep talking for hours and this is probably one of the longest podcasts.

Speaker 2

I tend to do that.

Speaker 1

No, no, no. Aviation is close to so many of our listeners and I'm sure they found it all very interesting. I will note that we have a couple other podcasts centered around this. Episode 234, pilots, maximize your 401k Contributions. Episode 194, I did kind of a breakdown between Delta, american, united and compared all their best, all their retirement offerings, and basically said hey, if you had to choose between which airline you want to go to which one seems to be better? And they're all very similar. I think Delta is slightly ahead.

Speaker 2

Can I give an answer? I didn't listen to it. The first one that sends you an offer. That's the answer. That's a very good point.

Speaker 1

I know some very wise men that told me many of their stories of waiting for one job, waiting for one interview to come back, and they ended up getting dropped by the other company. So, yes, that is a very good point. You could always make a flip in training right if you came back later. We also have a YouTube channel, a Wiser Retirement. We've linked to financial planning why is it different for pilots? And then tips for airline pilots approaching retirement. On our YouTube channel, we also have linked to visual approach analytics. If you'd like to learn more about Courtney Miller and what he's doing at his company, I'm sure he would like to hear from you. If any questions, comments or business referrals, courtney, how do they? Is there a? You have your website. Is that good enough for people reaching out or do you want to add anything else to that?

Speaker 2

Yeah, so we offer a weekly newsletter that's free, always got data visualizations in it talking about what's going on in the industry. But I co-host the Time on Wing podcast which we talk about aircraft all the time the aircraft market. We meet with CEOs and executives in the leasing investing space airlines often.

Speaker 4

Okay, great.

Speaker 2

That's always fun If people are willing to put up with this podcast. Listening to me for this long on this podcast, you'd probably do okay.

Speaker 1

We'll link to that podcast as well. So anyway, courtney, thank you for doing this. I enjoyed our conversation and best of luck to you. Pleasure Casey. Thank you.

Speaker 4

Thanks for listening to a Wiser Retirement Podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestorcom and reach out.

Speaker 4

This episode was produced by Rachel Dotson. This podcast is strictly for informational purposes only and is not to be considered as investment advice or a solicitation to buy or sell any financial products, securities, digital assets or any other investment vehicles, or a basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guests may personally own securities, digital assets or other investment vehicles mentioned on this podcast. Neither the host nor guests of the show are compensated for their participation and no referral fees are paid to or received by any host or guest for clients, listeners or similar interests. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, insurance professional and or legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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Casey Smith

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