Golden opportunity?

Also in Paris, Canada-based CAE, operator of the largest network of civil training locations in the industry, issued its first Airline Pilot Demand Outlook, underscoring the need for major increases in training facilities.

It should know. With more than 230 full-flight simulators in 50 civil training locations worldwide, CAE serves approximately 3,500 airlines, aircraft operators and manufacturers across the globe and operates the world’s largest network of Ab-Initio flight schools, CAE Oxford Aviation Academy, at nine locations with a capacity to train 2,000 cadets annually.

Over the next ten years, it found, the world’s airlines will need 255,000 new pilots and 90,000 of them will be required in the Asia-Pacific. It says 50 per cent of pilots who will be flying by 2027 haven’t even started training yet and cockpit crew will have to be trained at a rate of 70 every day. It also reports a need to develop 180,000 first officers into airline captains, a greater number than in any previous decade. Of the 90,000 airline pilots needed in Asia-Pacific, 62,000 will have to be new captains.

“This record demand will challenge current pilot recruitment channels and development programs. New and innovative pilot career pathways and training systems will be required to meet the industry’s pilot needs and ever-evolving safety, competency and efficiency standards,” says CAE.

Neither is it a decade long challenge. Boeing’s latest crew forecast, issued last year and covering a 20-year period, says Asia-Pacific will need 248,000 pilots, 268,000 technicians/engineers and 298,000 cabin crew over that period. The big jets aren’t the only planes that need more crew. Brazil’s Embraer also released a twenty-year forecast at Paris, predicting a need for 6,400 new deliveries in the 70-130+ seat segment, regional jets worth some $300 billion, with 1,710, or 27%, of these headed for Asia-Pacific.

The big questions: just how much of this training business can Australia capture and is enough being done to make more inroads into what is a multi-billion Dollar market?

The answer, according to consultant Neil Hansford, chairman of Australia’s Strategic Aviation Solutions, is “No”. He says that not only are there not enough pilot training academies in Australia, there is a surprising lack of interest for investing in what can be a very lucrative business.

“Australia is sitting here. This is the land of plenty. It can be a very profitable business if run properly. If it is run with all of the disciplines of running it like an academy with the students on site, keeping your costs low, not paying Macquarie Bank landing and handling fees, the model works and Australia is perfectly placed to do it because of the available airspace.”

No-one is suggesting the training sector in Australia is a desert. There are 206 flying schools around the country, although only 25 have approval to train overseas students. Asian countries have been sending students Down Under for years and several have facilities here. Singapore Airlines has a branch of its flying college at Jandakot in Western Australia. Guangzhou-based China Southern Airlines set up its West Australian Flying College, training pilots at Jandakot and Merredin. It also sends students to train with Moorabbin Flight Training Academy at Mangalore in northern Victoria. Shanghai-based China Eastern Airlines has partnered with the CAE Oxford Training Academy in Melbourne, and Hainan Airlines has teamed up with Port Macquarie’s Arena International Aviation.

The biggest development now underway is construction of the $52 million Australia Asia Flight Training (AAFT) facility. It will be a 600-student residential training academy at Glen Innes on the Northern Tablelands of NSW to train commercial pilots and aircraft maintenance technicians for the region and it will become the biggest flight training school in Australia.

AAFT affiliate Australian Wings Academy runs a leading flight training academy in Coolangatta, Queensland and Glen Innes was selected for the major expansion after a seven-year search for a location that could meet the standards required by the company.

Also on an expansion drive is global training organization Airways Aviation. Its Australian branch operates at Coolangatta on the Gold Coast and at Caloundra on the Sunshine Coast. Airways already has airline training academies at Oxford, England, Huesca-Pirines Airport in Spain and at Podgorica in Montenegro and it operates other centres around the world seeking experienced crew for airlines. One of its major customers is Dubai’s Emirates Airline.

In Australia, the vast majority of its students are currently private individuals, mostly from Asia, paying their own way but recently appointed general manager Australia, former Australian Army helicopter pilot Leo O’Reilly, says the aim is to turn this around and have airlines as the majority of customers. It has bids in for contracts with two large Asian operators at the moment.

O’Reilly says the goal is to turn Caloundra into the main airline training base, with motel-style accommodation for students. He has no doubt about future prospects for business in Asia and is acutely aware of the possibility there will be pilot shortages.

“You’ve never had a generation of baby boomers about to retire. The average age of the pilots (today) is high, very high. And certainly all the grade one instructors and chief pilots are quite old. There might be enough people walking around at the moment but I think with the number who are going to be retiring in the next five to ten years we will have this requirement for pilots. I fully believe we are going to have a pilot problem.”

He says the priority now for Airways is getting those airline cadetship programs coming through and he wants the first one in place before the end of the year.

While cadets from across Asia, ranging from India to Vietnam, Thailand to South Korea, have or are being trained in Australia, China is clearly the veritable Golden Goose. It simply can’t meet its own demands for cockpit crew for a number of reasons, including the extraordinary growth of its airline fleets and control the military has over airspace. There are also regulatory drawbacks. For example, if a flying school has an accident or incident it can be suspended from operating for as much as six weeks. As a result, Chinese carriers have been training most of their pilots in the U.S. or Australia.

There is very substantial interest from sophisticated Chinese parties to find capability to train in Australia.

But Hansford says that, given the international geopolitical situation, it’s now clear that the Chinese airlines are being “guided, told or incentivized” to remove their training or dramatically reduce their training in the U.S. and that as a result “at the moment there is very substantial interest from sophisticated Chinese parties to find capability to train in Australia… China’s got all this metal on order and they’re not training the pilots fast enough so in the end the metal is going to be sitting in Mr Boeing or Mr Airbus’ hands waiting for them to get enough crews.”

The opportunity is clearly immense.

“The Glen Innes Academy, which is now shovel ready to do between 400 and 600 commercial students, once that goes ahead that will still only do about 3 per cent of the unavailable training places. Basically, they won’t have to take anyone off anybody. There’s 19,000 unavailable training places existing in the market so any capacity that is put in, so long as it is of a high Civil Aviation Safety Authority (CASA) standard and had a long history of delivery of international students will be supported,” Hansford adds.

He says Australia could cope with another seven to eight large training schools but not in the capital cities.

“The problem in capital cities is that since the Bankstowns and the Moorabins and Archerfields have fallen into the hands of property developers charges for landing a Cessna 172 or a Diamond, you certainly don’t get rich out of that.”

There are other restraints to training efficiency at urban centres. For example, at Bankstown only six aircraft are allowed in the circuit, which is restrictive. There is also other general aviation traffic.

“This is why Glen Innes is perfect. It’s got perfect weather, it’s a perfectly built airport by the Air Force and the community want it. A development like the Glen Innes development means 134 jobs for local people and about $20 million plus of economic development to the town. And the (NSW) government is encouraging the development of those sort of facilities out of the capital cities but more importantly in the tree-change areas, not the sea-change areas. They don’t particularly want these on the coast. These airports are developing well enough anyway.

There is political pressure to get training out of the cities. It’s significant. So there is a need for seven or eight schools, each capable of doing about 500 students and I think that will accelerate with the perceived pressure coming on the Chinese airlines to not be reliant on schools in the U.S.”

There is a need for seven or eight schools, each capable of doing about 500 students. Neil Hansford

The bottom line, according to business experts, is that there is potential, if enough schools are built, for Australia to capture between 10 per cent and 20 per cent of what will be a very lucrative market going forward.

In the midst of this most analysts believe Australia’s major scheduled airlines, Qantas and Virgin Australia, are well placed to avoid any significant pilot shortages, despite the penchant of some crew to head to the Middle East to secure tax-efficient jobs with the big Gulf carriers. They have long-established and well proven training and recruitment programs.

“I think Qantas have got the situation that whenever anybody has got a pilot Qantas haven’t got a problem because they are at the top of the pay scales, they are at the top of the prestige scales so they can just draw from anybody else. What’s effectively happened is that in Australia the main airlines – the Qantas’, the Virgins and the Jetstars – have basically dredged dry the available supply of trained pilots with hours on them.”

It has been a different story for regional operators such as REX. “REX set up their own academy at Wagga Wagga and have been training their own,” Hansford pointed out.

“But they’re constantly fighting the problem of people being prepared to sacrifice their golden handcuffs to go and fly for Virgin or Tiger because they don’t want the prospect of flying a geriatric Saab 340. So if REX hadn’t run their school at Wagga they would be in diabolical trouble.”

Another pipeline that has been virtually cut off for airlines is the stream of pilots it once lured from the military. Now that the Royal Australian Air Force, having spent some $2 million to train each of its “jet jockeys”, is giving cash incentives for experienced pilots to stay the number opting for a commercial career has dwindled.

Of course, major airlines, whether in Australia or elsewhere in the region, are constantly reviewing their crew requirements and training needs. It has to be done well in advance, given new aircraft and fleet expansion programs occur over a large number of years. CASA statistics actually show the number of licensed commercial airline pilots in Australia has remained relatively stable, at about 7,400, over the past five years, despite predictions of significant fleet growth in future. But carriers are clearly aware of the situation.

Qantas, for example, as recently as March began its first major recruitment drive in nine years. It is also targeting women, who represent less than five per cent of commercial pilots in Australia, through a series of training seminars being held around the country.

In its report on pilot needs, CAE describes Asia-Pacific as a vast geographic region that includes major as well as mature economies.

“Strong economic growth, an expanding middle class, new low-cost carriers, new routes and increasing competition make Asia-Pacific the fastest-growing region for air travel. Once limited to major Asia-Pacific cities, international airline service is now being extended to secondary and tertiary cities with new nonstop routes.”

It says countries with a large and swelling middle class like India and China require aircraft in large numbers to support their economic growth.

“Both countries have the potential to become even larger aviation markets with the relaxing of regulations and new investments in airports and air traffic management systems. In addition, India’s recent implementation of less stringent foreign ownership rules may help stimulate air travel growth.”

However, it points out the demand for new pilots is uneven.

“Airlines experiencing rapid growth often need to leverage short-term solutions to meet their pilot needs. These solutions include infrastructure that supports workforce fluidity by placing the right pilot at the right place at the right time. A pilot roster containing highly experienced contract captains and first officers from diverse airline backgrounds not only addresses short-term operational requirements, it also plays an important role in accelerating the development of younger first officers.

While these contract pilots can be effective in addressing part of the demand, airlines are creating their own dedicated cadet programs to source local pilots for the long term. Given the growing need for pilots in markets where English isn’t the primary language, the assessment of language proficiency is becoming increasingly important.”

There is little doubt Australia has the potential to become the pilot training capital of the world, given increased State and Federal Government support and a realization by a currently surprisingly reluctant investor community that this is a sector that holds big promise of major returns.

Some airlines may be struggling to produce satisfying profits but there’s money to be made training pilots, maintenance technicians and cabin crew.