By Tax Credits of Flickr
At first glance a 5000 dollar bonus sounds pretty tempting. After thinking about it I wondered why would a couple of airlines need to offer a 5000 dollar bonus to get pilots to work there when others don’t? Is 5000 dollars enough to outweigh the cost of working at these airlines?
Realizing the payscales are pretty much public knowledge, and that upgrade times can reasonably be predicted in the short run, I set out to quickly run some numbers and see, are these 5000$ bonus’s enough to justify going their. Obviously there are lots of intangibles like living in base, or perhaps one has always dreamed of working a place like Republic. Those intangibles obviously can’t be given a price. So the following is just the numbers of going to a place where they may be offering a 5000$ dollar signing bonus.
It should also be noted this comparison does not include retirement plans or beneficial work rules that may exist at a given airline and could also represent a significant value , but that are not reflected here.
The two airlines offering the bonus:
The following assumes 85 hours of flight pay a month.
Republic
Current projections show at least a 5 year upgrade. At the end of 5 years a pilot ends up earning the equivilent of 187,617$ if we apply a 3% annual interest rate to earned money. I went ahead and compounded it at the end of each year.
| Republic | |||||
| Year 1 | 2 | 3 | 4 | 5 | |
| Pay Scale ($) | 23 | 31 | 36 | 37 | 37 |
| Salary ($) | 28,460 | 31,620 | 36,720 | 37,740 | 37,740 |
| Accumulated Value of Money | 29,314 | 62,762 | 102,466 | 144,412 | 187,617 |
The Cons: Republic is very close to a strike, and has been in contract negotiations for almost half a decade. A strike would drastically hinder their ability to win any future flying, ie Comair.
American Eagle
Current projection also show at least a 5 year upgrade. At the end of 5 years a pilot ends up earning the equivilent of 198,826$ if we apply a 3% annual interest rate to earned money. As before it is compounded at the end of the year.
| American Eagle | |||||
| Year 1 | 2 | 3 | 4 | 5 | |
| Pay Scale ($) | 25 | 34 | 37 | 39 | 40 |
| Salary ($) | 25,500 | 34,680 | 37,740 | 39,780 | 40,800 |
| Accumulated Value of Money | 30,500 | 67,135 | 108,022 | 152,236 | 198,827 |
The Cons: Having been a wholly owned carrier almost since its inception, it may now be spun off after the AMR bankruptcy (see this article on Regional Types). Eagle naturally has higher costs because of its wholly owned condition (not pilot costs as much: a topic for another post) and may have difficutly winning needed future contracts from AMR in the future and other carriers.
All these Cons add an element of Risk. In the financial world if Risk is not compensated by additional reward it is considered a bad investment. For example when someone has bad credit, lenders will typically charge a higher interest rate to make up for the increased risk of accepting a borrower.
Now lets compare two airlines that do not offer the 5000$ bonus and are hiring.
ExpressJet
Current projections show at least a 5 year upgrade. At the end of 5 years a pilot ends up earning the equivilent of 190,903$ if we apply a 3% annual interest rate to earned money. I went ahead and compounded it at the end of each year.
| ExpressJet | |||||
| Year 1 | 2 | 3 | 4 | 5 | |
| Pay Scale ($) | 23 | 34 | 37 | 39 | 40 |
| Salary ($) | 23,460 | 34,680 | 37,740 | 39,780 | 40,800 |
| Accumulated Value of Money | 23,460 | 59,884 | 100,553 | 144,543 | 190,903 |
Cons: No bonus, and in contract talks with a merge with ASA.
SkyWest
Current projections show at least a 5 year upgrade. At the end of 5 years a pilot ends up earning the equivilent of 194,216$ if we apply a 3% annual interest rate to earned money. I went ahead and compounded it at the end of each year.
| SkyWest | |||||
| Year 1 | 2 | 3 | 4 | 5 | |
| Pay Scale ($) | 22 | 36 | 38 | 39 | 41 |
| Salary ($) | 22,440 | 36,720 | 38,760 | 39,780 | 41,820 |
| Accumulated Value of Money | 22,440 | 60,935 | 102,686 | 146,740 | 194,216 |
Cons: No Signing Bonus.
Lets pretend somebody is willing to accept the risk to go to a Carrier that is offering this bonus, what would the contigency plan look like if the pilot was furloughed? Lets say the pilot was furloughed after 2 years with that company and then goes on to one of the non-bonus hiring carriers. At the end of 5 years after being furloughed and the rehired the 3rd year, the accumulated value would be 171,020$.
| Contingency | Republic | SkyWest | |||
| Year 1 | 2 | 3 | 4 | 5 | |
| Yearly Salary ($) | 28,460 | 31,620 | 22,440 | 36,720 | 38,760 |
| Accumulated Value of Money | 28,460 | 61,882 | 86,852 | 127,279 | 171,020 |
In summary:
I was fascinated to find out that in many cases a 5000$ hiring bonus attempts to hide poorly crafted and sub par pay scales. Often even with the bonus 5 year accumulated compensation is still less than many of the other airlines not offering the bonus’s. In addition, many of these bonus carriers carry higher risks associated with poor employee-management relationships, and subsequently additional burdens (expensive management teams, poor investment decisions, ie) carried by these types of teams.
So even though it might look like a good deal, one has to ask why?
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