Should I Give Up Retirement to Join the Airlines Now?

One of the things that made it frustrating trying to figure out whether to stay in the Air Force or get out was the lack of concrete information about the airline industry. I think we worry about making someone angry by asking directly and we don’t necessarily even know whom to ask in the first place. The information I needed was all out there (AirlinePilotCentral.com is outstanding) but I didn’t know how to put it all together.

This June 2016 article is courtesy of Jason Depew and his outstanding aviation blog at AviationBull.com.

One of the things that made it frustrating trying to figure out whether to stay in the Air Force or get out was the lack of concrete information about the airline industry. I think we worry about making someone angry by asking directly and we don’t necessarily even know whom to ask in the first place. The information I needed was all out there (AirlinePilotCentral.com is outstanding) but I didn’t know how to put it all together.

I work for a major airline now and things are somewhat clearer to me. I’ve continued hearing questions from others that I asked myself a lot too:

“How does pay at the airlines compare to pay in the Air Force? Does it make sense financially to give up a military retirement that includes free health care for life to start working at the airlines now instead of retiring and joining the airlines 9 years from now?”

This post is an attempt to answer those questions with some concrete information about actual airline pay. The short answer is: Yes, it’s okay to forgo a military retirement and join the airlines now. Your family will not suffer financially if you choose that path (even taking health care into account).  Knowing this, I assert that finances should not be a major factor in the decision to stay or leave.

A more cynical (yet still fair) way of saying this might be: there is absolutely no financial incentive for you to stay in the military until retirement.

The long answer to this question will explain a bit about how airline pay works, illustrate/justify my position with actual numbers, and discuss some of the non-financial factors that I recommend using to help make your decision.

I liked being in the military because as soon as you met someone you knew his or her last name and exactly how much money he or she made. (He literally wore it on his sleeve…or somewhere on his shirt/jacket.) The airlines are essentially that way too. Their pay charts are all published online. They’re not secret. I also like these two industries because men and women get paid the same. There are no games about negotiating your salary, paying women less, or trying to keep your previous salary secret. I don’t see a need to play any of those games here, so I’m going to try to give you real numbers to the best of my ability.

I’m going to use the numbers for my airline because they’re want I know. (Sure, Delta is the best, but that’s beside the point.) Each airline has it’s own pay charts and policies meaning the numbers could work out a little differently for a different company. If you run the numbers for a different company I think the results will still stand though. An airline career will be financially comparable to taking a military retirement. Therefore, you should base your decision on factors other than money.

Ready? Here we go:

How the Airlines Pay

Airlines pay their pilots an hourly wage. The clock counting “Block Hours” essentially starts when you push back from the gate and ends when you stop at the next gate with motors shut down. You also get paid your hourly wage for deadheading – riding in the back of a plane to reposition for your next flight. Deadheading isn’t counted in “Block Hours,” but you get “Credit” for the hours you spend there. There’s more to it than this, but that summary is good enough for our purposes today.

Most hourly wage earners live lives of uncertainty, never sure how many hours their company will let them work. The airlines don’t do that to you. They promise to pay you a minimum number of hours per month…even if you’re on reserve and don’t fly a single day that month. That number of hours changes based on a lot of factors. For our purposes, we can say that number will be between 75 and 80 hours. Multiply that by 12 months and you find that you’re guaranteed to get paid for somewhere in the range of 900-960 hours of “Credit” per year.

The airlines pay you for a few other things. You get paid to do quarterly CBTs (about 2 hours, only related to flying your aircraft,) you get a small per diem while on the road, you can fly more than the minimum number of hours, you can fly some trips for premium pay (more on that later.) You’re guaranteed 900-960 hours of pay per year for flying, but given the other ways to make money I feel like a realistic low-end estimate would be to say that you can expect to get about 1000 hours of pay per year. So, if you look at the charts on AirlinePilotCentral.com and see that first year pay at Delta is $70/hr, I feel like it’s a reasonable low-end estimate that you’ll make $70,000 in direct monthly pay during your first full year. The same goes for the 777 Captain making $270/hr -> $270,000/yr.

However, that is not the end of the story! Delta also contributes 15%, on top of your normal pay, directly to a Fidelity 401(k) account of your choosing. That means during your first full year with the company, Delta will deposit about $10,500 into your 401(k), in addition to the $70,000 they pay you on your monthly paycheck.You can also choose to contribute some of your pay to that account, up to a combined total of something like $53,000/yr. Of that, $18,000 can go into a Roth 401(k) account that will never be taxed again. This is a very important part of your overall compensation. Some companies will “match” your 401(k) contributions up to a certain percentage. You should always maximize your contributions to meet that percentage. This is far better than the pension plans of ages past. Once the money is in your account, it’s your property. The company can’t touch it, they can’t mismanage it, they can’t steal or squander it, they can’t negotiate it way in a merger or bankruptcy. (Not that I think Delta would ever do any of that.) If you still think pensions are better, go talk to someone who flew for Eastern Airlines or a city employee in Detroit.

In addition to your regular pay and your 401(k), Delta also does profit sharing. They pay it as a lump-sum every Valentine’s Day. The amount is based on a formula and changes every year. Last year it was 21.4%. Yes, that means if a first year pilot made $70,000 in regular pay that year, he or she got a check for somewhere around $14,980 on Valentine’s Day. 2015 was a great year for Delta and I think 2016 is going to be even better. That won’t always be the case…profit sharing could be zero in a bad year. In my calculations I assumed a career average of 10%. Sadly, not all companies share their profits…American just started this year. You can download my Excel workbook and play with that number as you see fit.

Setup for Comparison

As I’ve mentioned, the airlines give you more than just base flight pay, 401(k) contributions, and profit sharing. Being a Line Check Airman or simulator instructor pays extra. You’re not limited to only flying 900-960 hours per year…the FAA will let you fly 1000 hours if you want. You can earn premium pay under some circumstances. However, these things aren’t necessarily guaranteed or consistent from month to month, so they’re hard to build into a spreadsheet. For our discussion here I only consider regular pay, 401(k) contributions, and profit sharing. I feel like this makes for a conservative estimate of what you can make in the airlines.

If you feel like working harder, it is possible to make a lot more than the figures I come up with. There are senior MD-88 First Officers (FOs) at Delta who fly a lot of premium pay trips and make upwards of $380,000 each year. That’s potentially more than twice what their Captains are making! For our purposes, we’re going to assume that you only get paid the minimum. I used 75 hours per month for 900 hours per year.

That makes my calculations potentially a very low-end estimate. However, the military has some opportunities to earn extra pay too. If you fly for AMC, you’ll make a lot of money in TDY pay. If you have foreign language skills, you could earn an extra $12,000 per year. However, those aren’t universal among military pilots. I didn’t include any of those extra pays in my calculations either. I figure that it helps keep the playing field roughly even.

One of the major incentives for military retirement is that it (currently) includes free health care for life. Health care costs “a lot” and people are scared of that…my wife sure is. Thankfully, at indoctrination training (Indoc), Delta’s health care provider gave us actual data on what each of their plans could cost us. The absolute maximum out-of-pocket costs for their most expensive plan that covers you and your family is $13,100 per year. The absolute maximum for their less expensive plan is $7,600. The plans are complicated and full of caveats; however, I feel like the figure of $13,100 is useful when comparing benefits between military and airlines. So, in my calculations for airline pay, I subtract out $13,100 per year from the value of total compensation. (I’m assuming that the level of care that $13,100 buys you would be roughly equivalent to what you get from Tricare.) Chances are it will cost you significantly less than this figure…I wish you and your family good health and minimal need to ever see a doctor. Feel free to play with the spreadsheets to put your own numbers in there.

For the charts that calculate earnings based on retiring from the military before starting to work for the airlines, I didn’t subtract the $13,100/yr from you airline compensation because I assumed you’d have access to Tricare as a military retiree and won’t need to pay for Delta’s health care.

Other assumptions? For the military side, I used the 2016 Pay Charts available here. I assume you would be an O-4 at 12 years in. I give you flight pay, BAS, an “average” value for BAH based on that for Hurlburt Field, FL (aka the Promised Land), and the 9-year USAF pilot bonus. I assume that you get flight pay for all 9 of the years that you remain in the military (not likely) and that you retire as an O-5. I assume you’ll live to 80 years old. In both cases I assume that you work for the airline until age 65 and then never work again. I assume that in both cases you go directly from the military to a major airline. Unfortunately, that isn’t always the case. If you ended your military career flying a desk or a UAV, you might not have enough recency to get a job at the majors. You could potentially have to go fly for a regional airline for a couple years before the majors would pick you up. The regional market is shrinking and will probably be at least partially absorbed by the majors, so this could all change. Working at a regional could have a significant impact on your total earnings though. If you want an airline career, this needs to be a major consideration when deciding whether to stay in or get out, and what assignments you accept at the end of your military career.

If I forgot to mention or consider an assumption let me know and I’ll add it in here.

I also need to note that Delta is currently in contract negotiations, so the pay charts will look a lot different a year from now than they do today. The Air Line Pilots Association (ALPA) started our negotiations asking for an across-the-board 40% pay raise for pilots. That’s probably not likely; however, United pilots got a 23% raise in their recent contract negotiation. Each of the three major airlines feels obligated to beat the total compensation of the other two any time they renegotiate a contract. Delta will have to beat what United pilots are currently getting, so the pay raise should be significant. For our discussion, I assumed a 20% pay raise, and I feel that’s conservative. I’ve run the numbers for the current contract (“Old” charts in the workbook,) and under a theoretical new contract (“New” charts.)

So, how does the military to airline comparison work?

The most important chart in my workbook of calculations is the “Summary” tab. It shows the total career earnings for getting out after 11 years in the military and flying for Delta until age 65, or retiring from the military at 20 years before going to work for Delta until age 65.

However, you can’t make a direct comparison in total earnings. Your pay at Delta increases a lot faster and peaks a lot higher than your military salary does. Since you have more money to invest sooner, you can use the power of interest to make a lot of money for you. To compare apples to oranges we’ll use a calculation called the “Net Present Value” (or NPV.)

NPV is the tool you use to answer the question of what to do if you just won the lottery. The lottery commission is offering to give you a one-time lump-sum payment today for 50% of the total price value, or to pay you the full prize value divided up over 30 years. NPV takes time and interest into account and tells you the equivalent value of that 30 year annuity in terms of a single lump-sum payment today. You run the NPV and if the value of the annuity today is more than the 50% lump-sum they’re offering today, you should opt for the annuity. If not, you should take the lump-sum and run.

You’ll find an NPV for each scenario on the “Summary” tab in the workbook. It assumes a Discount Rate of 8%. I’ll leave it to you to read up on what that means and to play with that number as you like. The NPVs are the values to compare though. When you do, you’ll find that military retirement has a slight edge under the current contract, but that the airlines win by a similar margin under a new contract…all given the assumptions I’ve made. Once again, the difference is so small that I feel it shouldn’t be a major factor for you, but let’s let the numbers do some talking.

Actual Numbers

Here’s a link to the Excel workbook I used to make my comparison. It’s view-only here, but you’re welcome to download and modify it as you see fit. The yellow boxes on the “Summary” tab are the variables that you can modify to test out different assumptions. If you want to change any of the actual pay/wage rates you’ll have to do that the hard way.

I ran the numbers for three different airline career tracks:

The first one assumes that you only ever fly the B717 for your entire career and that it takes you 12 years to upgrade to captain. This isn’t a very likely career path and is presented as a worst-case earnings scenario. However, for anyone who can’t leave the military until 15-20 years from now, your career path will look more like this than anyone who leaves before that time.

	vs.
B717 (Old Contract)		B717 (New Contract)

The second scenario assumes that you only ever fly the MD-88 for your entire career. You stay in New York and upgrade to Captain after 2 years. Believe it or not, that upgrade time frame is realistic for the MD-88 in NYC. There are a few current Captains who fit that criteria. If you live anywhere near NYC, this would be a way to make a lot of money. This also isn’t an especially common career path. I present it as a middle-of-the-road case.

(Yes, I realize that neither the MD-88 or the B717 will be around forever. For our purposes, I’m assuming that whatever replaces them will pay roughly the same.)

	vs.
MD-88 (Old Contract)		MD-88 (New Contract)

The third scenario assumes a progression through several different types of aircraft, culminating as a 777 Captain. I think it’s a more typical career path and it’s more lucrative than the other two. There are plenty of possible career paths that could generate higher lifetime earnings. However, I feel like this is a decent high-end case for the average pilot.

	vs.
Airline Progression (Old Contract)		Airline Progression (New Contract)

I looked at all three of these career tracks for both the pilot who separates from the military after 11 years, and the pilot who retires from the military after 20.

	vs.
Military Retirement (Old Contract)		Military Retirement (New Contract)

Looking at these charts, you’ll see some impressive figures for total annual income in the airlines. First year income under our worst-case scenario (B717) jumps to over $82,000 under the new contract. Leaving the military will result in a temporary pay cut. However, even under our worst-case scenario your airline pay catches back up to your military pay by Year 3 or 4 (under the new contract.) From that point on, you make far more every year in the airlines than you would in the military.

Best-case top-end pay is $359,000…and that doesn’t include any premium pay. That sounds pretty great, but remember NPV. That $359,000 you’ll get 29 years from now only has a NPV of about $35,000 today.

Implications

The money is a wash. In almost every case I ran, the difference between retiring or not is an NPV of $130,000 or less. If you play around with the assumptions you may get a little more variation, but you have to work to generate a significant difference between the two paths. You might see more difference at some other airlines, but I doubt it’ll be that much.

We’re talking about a NPV of more than $2,000,000, for a lifetime earnings of no less than $6,300,000! There are a lot of people in this country fighting tooth an nail to raise the minimum wage to $15/hr because they think the jobs that pay minimum wage are valid lifetime careers. Whether you get out now or retire, you’ll be fine (as long as you manage your money wisely, don’t completely waste it, and have the basic human intelligence to invest and plan for your own future.) You’ll make more than enough money to fulfill just about any hopes and dreams your family could have.

“So what,” you ask? How about this: relax! Take a breath. Don’t sweat the money. Don’t make your decisions based on fear. Now that you realize this, you’re free to make your decision based on other factors that affect your Qualify of Life. I’d like to present a few for your consideration:

What You Should Consider Instead

1. If you stay in the military for another 9 years, how much flying will you actually get to do? Does that matter to you? Will you find personal fulfillment in the non-flying jobs you’re bound to spend some (or most) of those 9 years doing?My all-time favorite military commander always told us that we each have to come up with our own definition of career success. What is your personal definition of career success? Will staying in the military allow you to achieve that success?
2. Do you enjoy all of the non-flying work that you have to do per hour of flying you get in the military? (Mission planning, briefing, debriefing, testing, annual training, CBTs, additional duties, commander’s calls, etc.) Or, is putting up with those things worth it between the flying you get to do and the other parts of the job that meet your definition of success (patriotism, leadership opportunity, getting to wear pajamas to work?)Compare that to airline flying: At Delta I am required to show up NLT one hour before the first flight of a trip. The grand total preflight preparation required before any given flight can be accomplished in about 15 minutes. (I’ve had to switch planes in Atlanta, arrived at the aircraft after passengers had already started boarding, and made it out on time without breaking a sweat.) That includes exterior and interior inspection, all checklists, crew briefing, etc. Once the passengers are off the aircraft, the grand total time required to complete my postflight duties is exactly zero minutes. The one caveat is that if we’re laying over at a place without company maintenance we have to spend 5 minutes on an extra checklist and an exterior inspection. I have about 2 hours of CBTs every quarter that I can do at home. They’re only related to flying my airplane. (No sexual assault prevention training, information assurance training that hasn’t changed in a decade, megalomaniac ruling family sibling lover awareness training, etc.) I’ll have annual sim training and the odd line check as part of my regular flying schedule.

   I haven’t been an airline pilot for long and I have several hundred hours (if not a few thousand) before I’ll consider myself “good” at what I do. However, compared to what you have to go through per hour of flying for the USAF, this job feels downright easy and I love that…not that I’m biased.

3. How do you want your time away from your family to be divided up?In the military you’ll get plenty of short TDYs and some longer deployments of 3-12 months. If you stay in for 20 you are virtually guaranteed to do at least one 365-day long deployment. Is your family okay with that?

   In the airlines you’ll spend parts of each month gone. Though unlikely, you could feasibly be away for two weeks straight. Most people aren’t gone for more than 4 days at a stretch. Some people try to bid for one-day trips so they can be home every night. There are lots of options, but you will still spend time on the road.

   Every family is different. Which option is better for yours?

4. How many days per month do you want to work?In the military, you will work ~20 days per month, every month at home station. You’ll work pretty much every day when you’re deployed.

   In the airlines, the absolute maximum number of days you can contractually be required to work on reserve is 18 days per month. As a “line holder” it’s usually less than that. I recently flew with a captain who said he’d finished 8 years bidding reserve as a senior FO. He worked an average of 5 days per month for those 8 years…and still got paid for the 900-960 hours of Credit that we just calculated.

   Stop and think about his effective hourly pay for a minute.

   This case is a distant outlier, but it worked for him. The airlines give you a lot of flexibility to prioritize time with your family or making extra money.

   There are trade-offs in both cases. You’ll miss some holidays and other important dates either way.

5. Do you know where you want to settle down? If you got out now would you be able to move there and settle down now? Is there a major airline with a hub near that place? (Even if there isn’t, the airlines make it possible to commute from nearly anywhere.)The military will continue telling you where to live until you get out. How will that affect your family? Do you have kids in high school and how will that affect them?
6. Will you miss military flying (in spite of all the BS you have to put up with to do it)? I’ll admit I do. Airline flying doesn’t give the same fulfillment as flying combat missions supporting troops with boots on the ground, or instructing a difficult student. If my family ends up settling down somewhere with a guard or reserve flying unit, I will at least consider trying to join it.Let’s be honest though…if you stay in for 9 more years, how much of that time will actually be spent doing this fulfilling flying? How many combat hours are you likely to get?

   I’ll also say that airline flying hasn’t been the utter boredom that I was worried it’d be. The flights in the MD-88 are short enough that you stay busy the entire time. The aircraft is quirky enough that it keeps you on your toes. There’s definitely a sense of accomplishment in managing a good landing while getting 160 people safely to their destination in spite of challenging winds, weather, or a crazy approach into somewhere like LaGuardia. It’s not night mountainous IMC terrain following at 540 KGS at 500′ AGL in the B-1, CT formation cloud chasing in the T-6, or directly contributing to the success and safety of Spec Ops troops kicking in doors and eliminating bad guys in the U-28. However, I am thus far finding airline flying to be engaging and fulfilling.

   I imagine that long-haul airline flying won’t be as engaging on average. The nice thing about the airlines though is I’m free to go back and forth between types of flying. If I don’t like one type, there are others to pursue. I’m not locked into a career path (that I may or may not enjoy) like I would be in the military.

   It’s also worth noting that my overall stress level per hour of flying in the airlines is almost zero when compared to life in the military. I’ve heard it suggested that less overall stress leads to a longer, happier life. If that’s the case, then the airlines have a definite edge for me.

7. Do you want to be an airline Captain? Do you want your choice of aircraft and location?Aside from getting paid a lot better, there is something about being in command of an aircraft that appeals to most of us as pilots. The airlines are in the beginning stages of a hiring boom that will last for the next 15-20 years. The earlier you join the airlines, the more opportunity you’ll have. You’ll be able to fly any aircraft you want and upgrade a lot sooner than usual. A lot of pilots right now have waited 10 or 15 years to upgrade to Captain. If you join a major airline in the next 5 years, waiting that long to upgrade will be virtually unheard of.

   On the other hand, if you don’t get into a major airline until the back side of this wave, it might be 15 years or more before you get to upgrade. You’ll be stuck behind thousands of other pilots and won’t have the opportunities that they have. If any of this matters to you, then you should consider getting out sooner rather than later.

8. Do you want a side gig?As an airline pilot, you’ll work fewer days per month than most other Americans. Most of the airline pilots I know use that free time to do something on the side. Some are chasing money, some just want a challenge, some take advantage of opportunities to support causes they care about. So far I’ve flown with: the commissioner of a youth soccer leave with more than 2000 players, the president of a school board, the owner of several retirement homes, a deputy sheriff, and several people who just enjoy being at home with their families. I’ve also known or heard of airline pilots who sell real estate, flight instruct, race gliders, write books, and fly in the Guard/Reserve. There’s no requirement to have a side gig, but it’s an option. If there is something in life that you’ve always wanted to do, but never had the time, the airlines might be an avenue to make that happen…even if all you want is to spend more time being a mom/dad/husband/wife/brother/sister/friend. There’s no right answer here. The point is: the airlines will give you more time to pursue these things than the military will. (Potentially a lot more.)
9. Are you feeling lucky?There’s a lot of uncertainty in life. What if another 9/11 happens and the airlines furlough a bunch of pilots? What if the price of oil skyrockets or the economy tanks? Those are situations you can’t plan for.  Several readers said they feel a great sense of security having a military retirement to fall back on. It’s tough to put a price on that!

   At the same time, I’ve flown with several captains who spent a few years on furlough. They all hated it, but they all survived and are now back at Delta as captains. They give me hope that it’s possible to survive rough times.

   Also along these lines, I saw the USAF do three rounds of Reduction in Force (RIF) boards in my last 4 years. They were booting people regardless of quality of past service or proximity to retirement. You won’t get 100% certainty anywhere you go.

   Another huge consideration is: what if you lose your medical before age 60? I suspect that a not insignificant percentage of us won’t make it that long. A military retirement is a nice backup option. There are companies that offer “loss of medical” insurance for pilots. It’s affordable, but it only pays for a few years. Something to consider.

   I want to use a story to illustrate one more thought to the discussion of using military retirement as a “safety net” of sorts:

   I was in a squadron where the commander got fired. It was a great squadron that had been flying combat missions continuously for years and accomplishing great things. Any of us would be very proud to command such a squadron. He seemed like a good commander to me and several of the factors that got him fired were way beyond his control. (The burden of military command….) We felt very bad for him when he got relieved of duty…

   …until his wife wrote a note to the squadron spouses group that I happened to see. She said that she and her kids had never been happier. They’d seen more of their husband/dad since he got fired than they had in years. He was going to scout meetings and sports games, he ate dinner with them, they spent weekends together…they loved it. From the tone of her note, it sounded like they even preferred it.

   We serve in the military for a lot of great reasons. Patriotism, sense of accomplishment, duty, fun flying, etc. Our families do an outstanding job supporting us, and we should thank them every day. Don’t ever forget though how much they are sacrificing so that you can continue to serve. There’s something to be said for shouldering the responsibility of providing financial support for our families. (There are far too many spouses and parents in this world who don’t understand that simple concept.) It’s extremely difficult to compare the hard mathematical certainty of a spreadsheet with the value our families place on time with us. We should want to provide for our families, but don’t forget that our families need more than money. Choose a path that will achieve the best balance of that for your particular situation.

10. What if you can’t fly for Delta?One reader mentioned that Delta tends to lead the industry in pilot pay and work rules. It’s true. I don’t say that to brag…there are a lot of great companies out there…and I have friends at many of them. Just use this for your own expectation management.

    Maybe someone else will call first and you don’t feel like being unemployed waiting for Delta to call. Maybe you have family or other ties in a city that serves as a hub for a different airline. Again, you might have to spend a few years at a regional before one of the majors calls. You might end up working for another company that doesn’t pay as well as the numbers I used in my spreadsheets. There’s nothing wrong with that. It’ll reduce your overall earnings, but I’ll assert that you will still probably be fine. Run the numbers for your particular airline, but don’t forget to consider all the non-monetary aspects of this decision.

11. Can you finish your time in the Guard/Reserves?If you can find somewhere to put in 9 good years of reserve service, you can still get a military retirement at age 60. Several readers have replied saying that this is an absolute game-changer for this decision. You can basically get the best of both worlds. There are lots of units hiring right now and the pilot training bases will probably always need people. Flying for the Guard/Reserves might be a great option for hedging your bets.

    Federal Law requires the airlines to give you up to five years (unpaid) off work to serve in the Guard or Reserves. This should be more than enough to accumulate 9 good years of part time work.

There are plenty of other considerations when it comes to deciding between leaving the military after 11 years versus 20. If you think there are any big ones worth mentioning, leave a comment or send me a note. I’m happy to add to this list.

I chose to get out of the military sooner rather than later. It was absolutely the right decision for my family and I’m glad I did it. As such, some of my discussion here has been biased toward getting out. However, don’t let me influence you too much. Like my old commander said, you must come up with your own definition for career success.

The one point I’ll reiterate is that money doesn’t seem to be a major factor in favor of either path. You’ll make enough either way to achieve your financial/material hopes and dreams. Don’t let money or fear about money rule your life. Choose a path that will maximize all the aspects of Quality of Life for you and your family. Good luck with your decision and thanks for your service either way!