Remember that pilot shortage we warned about and people couldn’t stop talking about a few years ago? It was a real thing.

Pilot hiring at the large airlines in the U.S. spent 27 months between 2021 and 2024 at three times the levels ever witnessed. The disruption was rapid and epic in proportion, owing much of its rapidity to COVID retirement buyouts and a drastic drop in hiring.

Now that we’ve experienced a full cycle of lull, panic, and then a sudden mid-2024 realization of overdoing it, the pilot hiring market looks to be returning to normal. Hindsight shows us just how crazy and acute it was. Since 2014, pilot hiring has been gradually increasing, driven by a combination of growth and a wave of retiring pilots.

Then 2020 did 2020 things.

But through the hiring lull (and early retirement buyouts) of 2020 and 2021, the sudden realization that the industry was short in late 2021, and the inevitable realization that airlines overdid it in mid-2024, an odd symmetry emerges.

If you consider the net of the lulls and the panic, it fits nicely into a remarkably stable trend line.

Don’t see it? Allow us to help:

The peaks fill the troughs quite nicely. The end of the pilot shortage, right?

Yes and no. Yes, the COVID fluctuations have been filled, but that overall long-term trend line is still moving up and to the right.

Congratulations. You’ve made it through the acute pilot shortage. Welcome to the chronic pilot shortage. This ride isn’t as exciting, but it’s way more expensive.

Something else happened during the short 27 months of the acute pilot shortage. A lot of new contracts were signed - eight to be exact.

What happens when you buy in a brief but record-breaking seller’s market? You pay a very, very hefty premium.

If ever there was a seller’s market in pilot staffing, it was when hiring was three times historic levels. Unfortunately for the industry's long-term health (though fortunately for the long-term health of pilot finances), the contracts bought in a seller’s market don’t simply snap back to normal with market conditions. (For detailed instructions on accomplishing this snap back, turn to Chapter 11 of your textbooks, page 1113).

Despite the wave of airlines tripping over themselves to lock in higher labor costs, two airlines stand out: Frontier and Allegiant.

First, let's examine Frontier. A new contract signed in 2019 wasn’t amendable until 2024. By then, the whoopsie of overdoing it was known. Still, this isn’t a good story for Frontier, an airline currently unable to find consistent profitability even with creative sale-leaseback accounting. The airline will eventually pay its pilots more in a new contract, though the open question is “when”. It could be years yet.

But Allegiant clearly stands out. Like the crowd, the airline could have negotiated a very lucrative contract during the acute shortage. It was amendable in 2021, making the timing nearly perfect for a seller’s market deal.

Allegiant didn’t bite. If you’re an Allegiant pilot, that’s frustrating. And yet the airline bucked the pressure to sign an expensive deal amid atrocious timing, emerging from COVID as a profitable LCC. That’s not something many low-cost airlines can say.

Perhaps “profitable” is a strong word (though the airline clearly is, even if at lower levels than before the pandemic). I prefer the term “sustainable,” as in the company can still sustain itself. That’s not a term that can be applied to Allegiant’s peers.

Yet, Allegiant’s pilots, represented by Teamsters, recently filed a petition for release from mediation. Translation: Things are not progressing, and the pilots are frustrated. A new contract is inevitable and will be more expensive for Allegiant.

But the seller’s market is now only one-third as powerful as it was when the eight peer contracts were signed. Adding to this, Allegiant just said the quiet part out loud. On yesterday’s earnings call, CEO Greg Anderson said, “The industry needs less supply, particularly in the low-fare space.”

That sets up a very different scenario for Allegiant’s negotiations than for the recent eight that preceded. Things are very different now.

Whichever way it all plays out, the Allegiant pilot negotiations will set the stage for the true post-COVID future of airline costs. Will the inertia of 40%+ raises during a record shortage be too much for Allegiant to counter, or will the cycle shift back to align with the re-rationalizing market?

Whatever the direction, it will be consequential for both the pilots and the industry.

But hey, if we wanted predictability and stability, we wouldn’t have picked aviation.

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