Coronavirus – How Pilots Can Make the Most of a Bad Situation

I’m not the sort of person to panic about the sky falling, but I will admit that I’m not sure what to make of the Coronavirus situation we’re all dealing with right now. Markets are down, airlines that reported the highest profits in history at the start of the year are now worried about furloughs and bankruptcies, and governments all over the world are imposing quarantines in ways that I never thought I’d live to see.

Although this situation sucks in most ways, I’m not especially worried. It’s going to continue causing us pain for a while, but I firmly believe that we have more good times ahead of us than bad. The following are some big-picture thoughts on our situation, followed by some advice on how you can make the best of a terrible situation.

Before we go there, I need to start with a disclaimer: I’m not a professional financial advisor. My comments here will address some general investment strategies, but I’m obligated to recommend you consult a professional before you try to implement any of them. If you want some background on why I make these particular suggestions, I recommend you read the entirety of my book, Pilot Math Treasure Bath. (This is an Amazon affiliate link that gives a kick-back to BogiDope.)

Table of Contents

1. Big-Picture Coronavirus Thoughts
2. Right Now - Coronavirus
3. Right Now - Your Job
4. Right Now - Your Cash
5. Right Now - Your Investments
6. Long Term - Jobs
7. Long Term - Investments
8. Wrap Up

Big-Picture Coronavirus Thoughts

This situation would be a lot easier if the COVID-19 symptoms were more shocking. Most people with Coronavirus will get a dry cough, some aches, and a temperature. That can’t be as bad as “unexplained hemorrhaging, bleeding or bruising” like with Ebola, right? The problems here are twofold:

First, although younger, healthy people aren’t likely to get that sick from this virus, it’s a killer among old and immunocompromised people.

Second, the long incubation period of the disease, coupled with the likelihood of mild symptoms, means that you could spend several days spreading it before you even have a clue you’re sick.

The average BogiDope reader will probably be fine. However, my parents are in their 60s and my wife’s dad is 74. If you cough on one of them, it could be a death sentence. The same might apply to your spouse, child, parent, or friend. I know it’s tough for us pilots to understand, but all this social distancing and these quarantines aren’t really about you. They’re about protecting everyone else from you - especially everyone else who has no defense if you expose them.

One of the phrases that is used in conjunction with pleas to stay at home and away from everyone else is a desire to “flatten the curve.” At least one site cites Dr. Drew Harris as coming up with the basic graphic that gets passed around.

The idea here is that if a bunch of vulnerable people like my Mom and your son all get sick at once, there won’t be enough hospital beds and ventilators to give them the care and even basic life support they need. At some point, if we run out of ventilators, the next patient to walk into the hospital will be told to go home and roll the dice. I hope that isn’t your Grandma.

The idea of flattening the curve means that fewer people get sick at the same time so that our country’s medical resources don’t get overwhelmed. We make this happen by isolating ourselves, and not going out unless we have to.

However, we should also realize that this doesn’t reduce your risk of getting sick. In fact, if you calculate the integral of these two curves over time, you’ll find that roughly the same number of people get sick over the course of the next year...or perhaps that the flat curve means even more people will get sick. The goal here isn’t to prevent sickness...we have no way to do that. The whole point is to keep from running out of ventilators because no doctor wants to send your asthmatic wife home to die.

With that in mind, please take the guidance from scientists and doctors at places like the CDC seriously. Your life may not depend on it, but I guarantee that the life of someone you love does.

Although we need to do what we can from a public health perspective, we can’t ignore the fact that COVID-19 is wreaking havoc on our economy. The US Government is having a hell of a time trying to balance the need to protect public health with a desire to keep the economy from crashing.

As bad as Coronavirus may be, it likely will not last forever. We’re seeing fewer new cases in the most affected areas like China and Italy. The US is only a week or two behind Italy on the timeline and could start showing improvements soon. I have faith that a combination of ingenuity, desire to do good, and greed will end up with at least one pharmaceutical giant coming up with some type of effective treatment for this disease.

In many ways, it seems unwise to cause economic catastrophe from which it will take years to recover when it’s likely that COVID will have gone the way of past pandemics like SARS and Swine Flu by the end of the year.

Travel-related companies like air and cruise lines have been some of the hardest hit as fear and government orders have cut travel to almost nothing. It seems strange that airlines who reported some of the biggest profits in industry history a few months ago are now worried about their very survival. (Much of the blame here lies with corporate executives prioritizing shareholder appeasement over the long-term health of their companies. For an outstanding discussion on that topic, check out this article.)

The US Government is trying to put together a stimulus package that will prop up some of the worst-hit industries. However, politicians on both sides of the aisle have thus far failed to agree on what to do...turning a national crisis into an opportunity for political theater. Here’s to hoping they’ll agree to something productive. (Just don’t get too excited about the Billions of dollars they promise to “give” you. The US Government is so far in debt that every dollar in this stimulus bill will be make-believe anyway.)

So, to sum up so far:

1. Coronavirus is a serious problem. It’s not about you...it’s about your loved ones.
2. Scientific solutions will save lives, at the cost of extending the duration of the virus’ impact.
3. It’s tough to balance the public health side of this with the economic impact side.
4. The Government, like the FAA, is here to help.

This doesn’t mean you’re screwed. There are a lot of things you can (and maybe need) to do to make sure you and your family weather this storm as well as possible. Let’s take a look at a few.

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Right Now - Coronavirus

Even if you’re healthy enough to survive exposure, you don’t want to get COVID-19. At best, it’ll be a miserable couple weeks. At worst, you could infect a loved-one whose body can’t defend itself. You don’t want that guilt.

The solutions here are simple: Stay at home. Wash your hands. Don’t venture out unless you have to. Will you get bored? Maybe...if you lack imagination. The miracle of the internet has placed almost all of the books, music, TV shows, and movies that humanity has ever produced right at your fingertips. Sure, you’ll have to pay to get access to much of it. If you can’t think of anything else to do, subscribe to one streaming service at a time. Exhaust your options there and then move on to the next one. I guarantee that the COVID-19 crisis will be over before you get all the way through Netflix, Hulu, Amazon Prime Video, Disney+, YouTube TV, HBO, CBS All Access, and whatever else is out there.

Don’t forget to eat right and work out...especially if you really do plan to watch that much TV. Even the strictest quarantines in Italy allow people to go to the grocery store. Be careful when you go, but get enough fruits, veggies, and real foods to get good nutrition. If you haven’t already, read The Obesity Code and How Not to Die. They’ll explain exactly what to buy and why.

You can do plenty of valuable working out at home. No, you don’t need a gym. Worst-case, YouTube is replete with free workout videos. So far, many quarantines have allowed you to run outside, at least in the suburbs. You’re highly unlikely to come into contact with any fluids containing COVID-19 if you’re running outside with nothing other than the soles of your shoes touching anything.

If you’re expected to go to work while Coronavirus is still a major threat, take precautions. Keep your distance from others, wash your hands frequently, don’t touch your face, etc. Do what you can and don’t sweat the rest. Speaking of jobs, let’s talk about yours.

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Right Now - Your Job

If you’re already senior enough at a major airline to be “furlough proof,” you should be pretty happy right now. Now it’s time to think about what you can do to help your brothers and sisters who aren’t as lucky!

If you’re still on Active Duty in the US Military, now is not the best time to leave. Most airlines, major and regional have stopped hiring. Both TSA and Compass have announced that they’re closing up shop altogether. Whereas our industry was rife with opportunities for military pilots transitioning to the airlines just a couple weeks ago, even the most highly-qualified military pilot will be hard-pressed to get an airline job for the next few months.

If I were you I’d stay on Active Duty for now...but don’t get comfortable! Before COVID-19, the airlines were all desperate for people. As of a few weeks ago, the airlines were woefully short of the 1,900-ish pilots they needed to hire this year, just to cover mandatory retirements. (And the airlines have been exceeding the mandatory retirement numbers by 15-25% every year.)

Travel restrictions have made it impossible for these airlines to interview new pilots, and even train the ones to whom they’ve extended Conditional Job Offers (CJOs). There will probably be some contraction of the airline industry as a result of this downturn, but make no mistake: our world is addicted to air travel. When this industry starts picking up pace again, it will move quickly!

If your goal is to ever leave the military and get an airline job, you must ensure you’re ready and competitive when the next hiring rush happens. First and foremost: this means don’t take a retention bonus, or an assignment with a long Active Duty Service Commitment (ADSC) unless you’re willing to give up a couple of thousand seniority numbers for the rest of your life. It also means, don’t just go fly the line under the blithe assumption that you don’t need to improve yourself. Continue to pursue advanced qualifications! Continue to develop yourself as an officer/leader. Take advantage of this time to have some more people (including some pros) put their eyes on your applications and resume!

Doing all these things will make you more competitive for an airline job when that market opens back up. However, it’ll also make you more attractive to a Guard or Reserve unit, which brings me to my next point….

If you’re a Guard or Reserve pilot, you’re probably pretty happy right now...especially if you also have an airline job. In times of crisis like this, most units are very good at finding orders to keep their people working and getting paid. I have flown with hundreds of airline captains and to a man (I have yet to fly with a female captain) they all advised staying in the Guard or Reserve as a backup for when (not if) something like COVID-19 (or 9/11, or bankruptcy, etc) happens.

We’re seeing this right now. If you’re in the Guard or Reserve and can pick up some longer-term orders, you’ll be helping your non-military airline pilot buddies by freeing up trips for them to fly to earn money. If your company is on shaky financial ground and considering furloughs, your ability to take some long-term orders could keep your friend’s family from wondering how it’s going to survive. You’d be serving your country in more way than one.

With the pilots of our country suddenly remembering what a good deal the Guard and Reserve can be, those units aren’t going to need to hire as many people in the near future. If you’ve been considering a move to the Air Reserve Component (ARC), but haven’t made it yet, you’re now facing an extremely competitive job market! Forgive us for suggesting that you may want to consider using the consulting services of a company that has helped hundreds of military pilots land the Guard or Reserve job of their dreams.

Although I feel that you’re better off finding a way to make things work in the short-term so that you can move to the airlines quickly, if you need job security right now you may want to consider pursuing a job as an Air Reserve Technician (ART). These jobs aren’t eligible for military leave under USERRA, but they’re stable and they pay very well. If you need to free yourself from the insanity of Active Duty, but can’t wait for the airline industry to turn around, an ART job may be just what you need.

For the young pilots out there who are still in training, I would keep going if I were in your shoes. I don’t think the downturn will last longer than it will take for you to finish UPT and accrue enough hours for an R-ATP, or get the 1,500 hours you need to get hired by a regional airline (in most cases). I believe that the job market will be ready for you by the time you’re competitive. As long as you have some way to pay for your training, I’d keep at it...which leads us to the next part of our discussion.

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Right Now - Your Cash

No matter where you are in your pilot career, you need to preserve at least some cash right now. I hope no major airline has to furlough pilots, but it’s not out of the question. I believe some regional pilots will start to furlough soon. If this stretches out long enough, even Guard and Reserve units may not be able to employ everyone full-time. You need to be able to support your family in case your income temporarily drops, or disappears entirely. Do not rely on debt to finance your day-to-day life!

This means now is not the time to spend a bunch of money on cars, trucks, boats, or other toys. Now isn’t the time to buy a fancy new house, or make major upgrades to the one you own. Now is not the time to plan a giant wedding for your child, or a big family vacation (even though cruise lines are offering some killer deals).

In Chapter 14 of Pilot Math Treasure Bath I warned that each and every one of us runs the risk of becoming a “Deadzoner.” That’s a stark reality for pilots at TSA and Compass right now. It could be a reality for many more of us. You may not be there yet, but you need to fill up your Treasure Bath now so that you can take care of your family if your company puts you into this terrible position.

If you have any consumer debt (credit cards, car loans, etc.) you need to be crushing it right now. You don’t want that hanging over your head if your company hits hard times. After that, you need to save up enough of a cash cushion to cover at least a couple of months of your family’s living expenses without work.

You don’t have to go crazy here though and hold a full year’s worth of expenses as cash. In PMTB I outline ways to use a regular taxable brokerage account or a home equity line of credit (HELOC) as an emergency fund.

My wife and I decided last year that we wanted to pay off our house, so we started a regular taxable brokerage account with Vanguard to hold our payoff fund. We invested it 50/50 in Vanguards Total Stock Market and Total Bond Market index funds (VTSAX and VBTLX, respectively). With the market booming last year, our investments gained more than 20% in value. With the recent (and ongoing) market crash, our balance has decreased significantly from where it was. However, holding half of our account in bonds prevented a lot of loss. Those bonds haven’t suffered at all during the downturn. If we needed some quick cash to live on, we could sell those bonds, at a profit, and leave our stocks alone to regain their value in the future. Those shares of the VBTLX bond fund are essentially as good as cash. They’re still earmarked as a house payoff fund, but they could be our emergency living fund if necessary.

I recommend you set up something like this...a taxable brokerage account where you store some of your emergency savings. You can invest in both stocks and bonds to reduce the risks associated with volatility, while hopefully earning more than you’ll get from a savings account. Having mentioned investments, let’s make sure to cover all our bases there:

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Right Now - Your Investments

First and foremost: do not sell your stocks or mutual funds to “minimize your losses!” This includes the stock-based funds in the TSP.

Yes, the market is down and your “balance is low.” However, until you sell your shares, that loss is only theoretical. The market will rebound, and your shares will regain their value. The only way you lose is if you sell now while the market is down. Let’s look at some history:

Can you tell that there was a terrifying stock market crash on 19 October 1987? The market lost 20% of its value in a single day. Oh no!

You may not notice it because that horrific occurrence is only a blip when you look at the market over the long term. This chart shows the S&P 500 dropping from $333.99 in August 1987 to $240.34 by the end of November. Guess what, it had reached a new all-time high over $342 by the end of July 1989, just 20 months after hitting rock-bottom.