Delta Airlines raised the pay of its pilots by 34%, a classic example of supply and demand. Airlines have been short on pilots and other personnel since the surge in air travel as COVID-19 infections dropped. Traffic on many airlines has reached pre-pandemic levels.
Reuters reports that pilots will receive an 18% boost when they sign the new contract. Further pay raises will be over the next three years. While the 18% figure is well above the inflation rate, future raises may not mean as much if inflation remains over 7%.
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One of the reasons for such substantial leverage is simple and unlike other industries. Delta cannot operate without pilots. Pilots are in short supply at all major carriers. The pilots have the ability to shut an airline down completely. While this might help the P&L because some essentials like fuel costs would drop, total revenue would race toward $0.
The stream of new pilots comes from a few sources, such as the Air Force. Many of these will not find commercial aviation compensation very attractive. The median pay for pilots is slightly below $100,000. Veteran pilots at the larger carriers make more. However, joining an airline is not a way to get rich.
The airline pay problem has not ended. Inflight personnel and ground crews have leverage because they can also bring airline operations to a halt.
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The airline industry’s future may well be one of much smaller margins as labor costs rise. The only solution is to raise ticket prices, which carriers have done. But, as far as consumer spending is concerned, that income has a cap.
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