The Air Force Pilot Retention Crisis Is Not Over

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Peter Brand: You’re not doing it for the money.

Billie Beane: No?

Peter Brand: No. You’re doing it for what the money says. And it says what it says to any player that makes big money — that they’re worth it.

Moneyball, 2011

Last year, the Air Force reported a growing shortage of pilots. While the service estimated that it needed 21,000 pilots to carry out the missions identified in the National Defense Strategy, it could only muster 18,900. When the Air Force had a 1,500 pilot shortage in 2017, the previous Air Force chief of staff called it a “crisis.” In fact, the current Air Force Chief of Staff, Gen. Charles Brown, already believes the Air Force’s combat edge over its competitors is thin and shrinking. The pilot shortage, a result of low retention, creates a negative feedback loop that only exacerbates the problem.

 

 

Some in the Air Force may assume that the service’s pilot manning problems may be over due to the recession caused by the COVID-19 pandemic. During recessions, Air Force pilots are less likely to leave the service for jobs with commercial airlines. As expected, airline pilot hiring went to almost zero when the pandemic began, and Air Force pilot separations and airline hiring are strongly correlated. This time is different, though, as demographic and licensing trends for airline pilots will significantly shorten the period before companies start recruiting military pilots again.

 

Figure 1: Airline Pilot Hiring and Economic GrowthSource: Chart generated by the author. U.S. annual airline pilot hiring by major carriers versus change in GDP, adjusted for inflation, from 1990 to 2020 (estimated). Data from Future and Active Pilot Advisors and the Federal Reserve Bank of St. Louis.

 

Unprepared, the Air Force has not implemented any fresh retention ideas since 2018, when it half-heartedly attempted, and then quickly aborted, a fly-only technical track program for its mobility pilots. Instead, it chose to focus on training more pilots to replace those leaving active-duty. I have three recommendations that will enhance the offer the Air Force can make to its pilots to stay in the service longer: strengthen the role of commanders in the retention process, target retention initiatives towards junior pilots, and offer more career agency at the outset of a pilot’s military service. Not every pilot will stay, nor should they. But, for those on the fence or leaning in, these changes might be enough to keep more of them.

The Airlines Are Down But Not Out

Historically, when the economy goes into recession, travel slows, and the airlines cease to hire many new pilots until several years into the recovery. While bad for the country, the military services usually enjoy higher pilot retention rates. In the past, when the U.S. economy tanked, and airline pilot hiring collapsed, Air Force pilots found themselves with fewer civilian alternatives for their unique talents. The last major pilot retention crisis began in the late 1990s and ended only in 2001 with the recession and 9/11. After that, the Air Force enjoyed healthy retention rates for over a decade until the most recent crisis began.

When the Covid-19 pandemic struck, decimating airline travel and the global economy, it seemed reasonable to believe that the Air Force’s pilot-manning woes were rapidly coming to an end. Without airline jobs waiting for them, more pilots will remain in the military to ride out the economic storm.

The civilian sector’s demand for military pilots is in a lull, for now, but it will rage when it reawakens. The airlines have a rapidly aging population of pilots to replace soon. In 2014, when airline pilot hiring began to accelerate, and Air Force pilot retention began to slip, there were 15,733 pilots within five years of the federal age limit of 65 — 2019 concluded with 21,292. The Federal Aviation Administration complicated the Air Force’s retention situation in 2013 when it increased the requirements to be an airline pilot from 250 flight hours to 1,500 hours, an astronomically expensive threshold for civilians to attain. The requirement for military pilots was waived to 750 hours, an easily attainable mark for Air Force pilots, thus making them even more attractive to airlines.

Of course, it’s possible that a COVID-19 vaccine fails to materialize, and airline travel doesn’t return to pre-pandemic levels for many years. That scenario seems unlikely considering there are 45 clinical trials for vaccines currently ongoing and recent Department of Defense research shows that airline travel can be accomplished with a low risk of exposure to COVID-19. The Air Force has a narrow window, probably no more than three years, to improve retention rates before airline hiring picks back up.

Retaining Pilots in the Air Force

The Air Force should take concrete steps to increase pilot retention now. Given the uncertainty of defense budgets during recessions, these efforts should minimize cost. My three recommendations are as follows.

First, the Air Force should restore trust in its aviation bonus program, the mechanism by which pilots commit to additional years of service in exchange for money, by centering it around the pilot-commander relationship. Second, the Air Force needs Congress’ help to change the National Defense Authorization Act to allow younger pilots to make service commitments earlier and receive aviation bonus retention payments sooner. Third, the Air Force can enhance its junior pilots’ career satisfaction by allowing them to commit to additional active duty service in the future for their preferred first assignment.

Empower Squadron Commanders to Be Honest Brokers

Squadron commanders are in the best position to present the aviation bonus retention contract and honestly discuss its implications with their pilots. The squadron commander is the only person who straddles the line between the senior leadership who make policy and the pilots doing the day-to-day work. The squadron commander is the leader that pilots trust most because they know their pilots and their families as well as their pilots’ career desires and feelings about the Air Force. But right now, the squadron commander is cut out of the process.

The way I got my aviation bonus offer was the same way every pilot, combat systems officer, and air battle manager got theirs: via a robo-email from Air Force Personnel Command. The Air Force asked me to consider a significant life commitment of three to 12 years in exchange for a modest sum of money, putting the onus on me to complete the necessary administrative steps to accept the contract. My commander was not formally involved in the process until I decided to accept the retention contract, at which point I had to track him down to sign in concurrence. That was it. He was never even notified that I was eligible for the aviation bonus or provided the program’s annual details.

Congress and the Air Force brand this rated officer retention incentive as a bonus — it’s not. It’s a labor contract complete with terms, conditions, considerations, and contingency clauses. Marketing the program as a bonus creates perceptions of ingratitude in senior leaders when pilots don’t take it. Who would refuse a bonus? The difference is that when civilians receive their annual bonus, they can quit the next day. Despite what it’s called, the aviation bonus program is no bonus.

In turn, pilots cynically joke that aviation bonus payments are “blood money,” tainted and dirty from corrupting oneself. A tad melodramatic? Indeed, but that’s what many pilots think. Unfortunately, this toxic attitude infects others and can complicate the decisions of those considering the aviation bonus offer.

The perception gap of the aviation bonus program between the Air Force and its pilots is a serious problem. The service needs more honesty to rebuild trust and rehabilitate the aviation bonus program. Trust won’t come from Air Force leaders with stars on their shoulders, and it won’t come through offering the retention contract via an impersonal mass email. It will only come from a pilot’s squadron commander.

Air Force Personnel Command should not be making aviation bonus offers. Instead, the Air Staff and Air Force Personnel Command should be empowering and supporting a process that puts the pilot-commander relationship at the center instead of on the periphery. Every signed aviation bonus retention contract is an occasion to be celebrated. It deserves recognition because it represents a pilot’s renewed commitment to the country and increased lethality and readiness for the Air Force.

Strengthen the Aviation Bonus Program by Offering It Early

Offering the aviation bonus earlier in a pilot’s career can dramatically increase the program’s financial value for many junior pilots without changing the contract amounts. Congress should lift the timing restriction on the aviation bonus payments so the Air Force can offer its younger pilots financial assistance and lock in service commitments early. This timing shift also helps the Air Force seize an information advantage by extending the aviation bonus offer years before its pilots begin flirting with Delta, United, and American Airlines.

Individuals differ, but generally, money now is almost always more valuable than money later. By the time Air Force pilots become eligible for the aviation bonus program, as majors with 11 years of service, they are already making around $130,000 annually. Providing the aviation bonus to junior pilots gives them the option to use the money earlier or save it for later. At present, pilots, even ones with every intention of remaining on active-duty for twenty years, have to wait to extend their commitments and delay access to the aviation bonus payments.

Through the National Defense Authorization Act, Congress controls both the cap and the timing of aviation bonus payments. The bill currently restricts payments until pilots are within a year of completing their initial service commitment. But Congress could leverage much more value from the aviation bonus program by shifting disbursements to a more advantageous time. Instead, it has allowed aviation bonus payments to atrophy in value.

From 2000 to 2016, Congress capped aviation bonus payments at $25,000, allowing inflation to eat 27 percent of its value in that period. Congress raised the limit to its current level of $35,000 in 2017, but that didn’t wholly restore its value. Not enough pilots signed aviation bonus contracts in 2000 and 2001 in the middle of the last pilot retention crisis, so there’s little reason to think today’s pilots would sign up for less.

Increasing the bonus would help retention, sure, but Congress can also strengthen the financial value of the current aviation bonus program by merely allowing the military branches to make payments earlier in a pilot’s career in exchange for service later. It should not matter when the military branches make aviation bonus payments to retain pilots so long as the taxpayer gets paid back in years of active-duty time later. The sooner pilots can make extended commitments, the more predictability and stability the Air Force will have.

We can look at the U.S government’s practices to get a sense of how timing changes money’s value. The Department of Defense currently uses a discount rate of 6.75 percent to calculate a lump sum for retirees who wish to take a fraction of their pensions upfront. In simplest terms, for a $10,000 pension payment owed next year, the Department of Defense discounts the amount and offers the retiree $9,325 today to settle the claim, an amount equal to 6.75 percent less.

This year, a $35,000 aviation bonus payment would have been worth $48,000 in 2015, a 37 percent increase in value using the same Department of Defense discount rate. The value of earlier payments could be even higher, depending on the individual. An American Economic Review study found the average discount rate for military officers to be 10 to 13 percent. Officers with personal discount rates in that range would value a $35,000 aviation bonus payment made five years earlier to be between $56,000 to $64,000, a bump of 60 to 82 percent.

At first glance, those figures seemed implausibly high to me. Then again, my family had our largest expenses when I was a young pilot, our budget was tighter, and I earned far less than I do now. The aviation bonus payments would have been a lot more useful to me then.

Loosening the timing restriction alleviates another major challenge: routine delays in defense authorization and appropriations legislation. For example, Congress did not approve the FY 2020 National Defense Authorization Act until December 2019, nearly the end of the first quarter. That left the Air Force scrambling to put together the terms of its aviation bonus offer, which it did not release until January 2020. The delayed timing allowed all pilots with commitment dates ending in FY 2020 to apply for separation and airline jobs before the Air Force could get its retention contract offer on the table. Most military transition programs recommend that service members exiting the force begin their job search process 24 months in advance, meaning that pilots are likely making retention decisions one to two years before the Air Force can offer its aviation bonus contracts to them.

Create an Assignment-for-Service Exchange at Pilot Training

Pilot retention should begin as soon as possible with the Air Force offering incentives early in an officer’s career, starting with pilot training. Career paths are heavily dependent on the aircraft and mission assigned at pilot training. Some opportunities open up when we join a community like mobility, rescue, special operations, or fighters. Still, many other options close, and with few exceptions, pilots can rarely change specialties. Instead of targeting retention efforts towards dissatisfied pilots eligible to leave the military, the Air Force needs to give career agency to its student pilots who are most willing to stay longer.

Nearly every student pilot has some inkling of what they want to fly in the Air Force. Some pilots have dreams of strapping themselves to a rocket, lighting the candle, and going Mach 2 in an F-16. Mine was to fly helicopters low-level in the middle of the night. Others want to fly C-17s to see the world. There is just as much variety of thought about duty locations. Japan and Germany are as appealing to some as being closer to home in the United States is to others.

The Air Force uses a fair system to match student pilots to their first assignment using class rank. The highest-ranked pilot gets their most desired assignment of what’s available, the second-ranked pilot gets their most preferred assignment of what remains, and so on until the last-ranked pilot gets what is left. This assignment match process is a sound system because it incentivizes student pilots to study hard and give a high level of effort in their training.

The problem is that with all the possible combinations of aircraft and bases, not all of the assignments will be available to every student pilot. Luck plays an outsized role. What about the truly motivated and qualified student who wants to fly a particular aircraft, say the F-35, but it wasn’t available to their class or a higher-ranked classmate got it? Tough break, right? What if that inspired student were willing to commit an additional 3 or 5 years of service beyond the 10 years already owed to the Air Force? The Air Force could allow commitment to be a factor in the assignment match process. Pilots with strong desires for their assignment and a willingness to serve additional years to get a higher-ranked choice gives the Air Force stability and a greater return on the enormous investment required to develop a combat-ready pilot.

This idea may seem outrageous at first glance, but the Army already does this through its Career Satisfaction Program. In 2005, as a response to atrocious retention rates among its junior officers, the Army revamped the way it matched cadets to their initial assignment by creating pathways to shape their Army careers. The Career Satisfaction Program offers a suite of incentives to cadets most desirous of career control. Cadets can offer three-year service contracts to the Army in exchange for branch or duty station preference, and until 2014 could also select a future graduate school opportunity.

What the Army found was the eager willingness of cadets to trade future service for career agency. In the first four years of the Career Satisfaction Program, 5,698 West Point and Reserve Officer Training Corps cadets, 42 percent of the eligible population, took at least one of the three options guaranteeing the Army an additional 17,596 years of service without spending a dime. The only bill to be paid was for the graduate school option holders who would return to the Army with an extended commitment after completing a master’s program. The Career Satisfaction Program is here to stay, Army program managers reported to me, because it significantly boosts officer retention.

Considering the Army’s experience, there is likely a sizable proportion of Air Force student pilots who would make a commitment on top of their 10-year service obligation to trade-up for a more desirable first assignment, either aircraft or base, or both. The Air Force should study the Army’s assignment allocation mechanism to figure out how to keep pilots motivated at pilot training and offer more career control to those who want it the most. As things stand now, the Air Force leaves a lot of years of commitment and increased pilot satisfaction on the table with how it does assignment matches at pilot training.

Conclusion

The pandemic-induced recession did not fix the Air Force’s pilot retention problems — it masked them. Airlines will be back and will be coming for military pilots soon, but the Air Force isn’t hostage to industry business cycles. The service has more sway than it realizes to influence pilots to stay for longer military careers, but it will have to change some legacy processes. The Air Force should center the aviation bonus program around the squadron commander, offer aviation bonus contracts earlier in a pilot’s career, and increase junior pilots’ career agency.

The good news is that these moves would not require additional funding. Apart from a small change in defense authorization language, the Air Force can easily implement these recommendations without congressional or Department of Defense coordination and without impacting the ability of its major commands, like Air Combat Command and Air Mobility Command, to utilize their combat pilots as needed. These reforms would, however, strengthen the Air Force’s relationship with its fighting men and women and do more to recognize their worth to the organization.

 

 

Tobias Switzer is a U.S. Air Force special operations helicopter pilot, foreign area officer, and an Olmsted Scholar. He is currently assigned to the Center for Strategic and International Studies as a military fellow, where he recently published a report on pilot retention. Opinions, conclusions, and recommendations expressed are solely those of the author and do not necessarily represent the views of the U.S. Air Force or the Department of Defense.

Image: U.S. Air Force (Photo by Master Sgt. Matthew Plew)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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