Calculating the Cost of Pilot Turnover

Abstract

Introduction Labor and fuel are typically the greatest cost drivers for airlines (Vasigh, Fleming, & Mackay, 2017). While some costs of labor are obvious, such as salaries and benefits, other costs are more difficult to quantify. The cost of employee turnover is not immediately clear, but turnover costs in other industries can be as high as 90-200% of an employee's annual salary (Allen, 2008). Small and regional carriers may be more likely to have high rates of employee turnover, with corresponding heavy cost burdens. The cost of employee turnover has been quantified in other industries (Hinkin & Tracey, 2000; Jones, 2008), but not yet in the airline industry. Because of the structure of the airline marketplace, costs cannot readily be passed on to consumers. Therefore, high costs erode airlines' often slim profit margins. For airlines, reducing costs can mean the difference between survival and bankruptcy. Airlines that can understand and control their costs at a granular level are the ones that will likely succeed (Saxon & Weber, 2017). Purpose of the Research This study created a simple model of pilot turnover costs in Part 135 carriers. In addition, this project estimated pilot turnover costs by using data from a Part 135 cargo carrier. Airlines can use this model to determine their own turnover costs. Background