New USAF Pilot Bonus - Too Little Too Late?

It seems that I hit a nerve when I recently compared pay between military and airline pilots. The story has been read more than 33,000 times to date and I've received numerous follow-up questions. Now, thanks to a recent Air Force Times article, there's a new perturbation in this discussion.

Before we get going let's remember the conclusion from the previous article: financially it doesn't really matter whether you stay in or get out. Another way of saying this could be: there is no financial incentive to stay in the military until retirement. The decision should be based on things other than money.

In 1999, the USAF raised its pilot retention bonus pay to a whopping $25,000 per year. At the time it was a pretty decent amount of money. Today, nearly 20 years later, inflation has significantly reduced the value of that bonus. Between exhaustion from 15 years of continuous war and an airline hiring boom that our industry has known about for the last 30 years, the USAF is finding itself unable to retain as many pilots as it needs. In recent efforts to improve pilot retention they've started offering the bonus for up to 9 years, and paying half of it ($125,000) up front. It isn't working. The Air Force is short by 500 fighter pilots, expecting that number to grow to 700 in the near future. Although most of the hubbub doesn't address it, they're having an equally difficult time retaining non-fighter and RPA pilots.

As one of his first acts as the new Air Force Chief of Staff, Gen Dave Goldfein joined with Secretary of the Air Force Deborah Lee James to write an op-ed in Defense One addressing pilot retention. The CSAF and SECAF finally admitted that the USAF has a pilot retention problem, and actually identified some of the problem areas driving that shortage. Based on the Air Force Times article, it appears that the USAF's leadership is actually getting through to congress. It looks like the pilot bonus will probably increase to somewhere between $48,000 and $60,000 in the near future. It turns out that even the lower number is better than $25,000 corrected for inflation since 1999. Good deal, right?

In hopes of making an apples-to-apples comparison, I plugged the new bonus into a new version of my spreadsheet. Long story short: it's still a wash.

Please feel free to play with the value for the pilot bonus on the "Summary" tab of the workbook (or any of the other yellow-colored cells.) At a bonus of $48,000, there is only a minimal difference between Net Present Value (NPV) of separating after 11 years versus retiring before joining the airlines. At a bonus of $60,000 the difference in NPVs can be as large as about $450,000 under Delta's current contract, but is closer to just $100,000 under a theoretical new pilot contract at Delta. I humbly assert that a NPV difference of only $100K is not enough to make a difference either way.

It's unfortunate that between USAF leadership and Congress, the best they've been able to come up with so far is $60K per year. I can personally attest to the fact that the entire US military is exhausted by more than a decade of continuous deployments. For military pilots looking at the combination of money and quality of life offered by the airlines, staying in the military to retirement is a pretty tough sell. The pilot bonus needs to be increased as part of an overall retention strategy; however, it is only part of a much larger equation. If you cruise forums, Facebook, Twitter, etc. you'll hear loud and clear that the main issues with pilot retention aren't financial at all. Until those other issues are addressed, I doubt increasing the bonus to $60K per year will be enough to generate the USAF's desired effects.

That's just one guy's opinion though. What do you think? Would an extra $35K per year keep you in the military?