Why Training Bonds?
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Why Training Bonds?
Given that the likes of CTC say on their website that they'll refund the training costs if someone who is training with them fails to make the grade (subject to Ts & Cs of course), the only purpose of a bond would seem to be that a pilot has to pay for the training if they leave the airline in question. Insurance covers loss of licence etc.
I've been looking into the British rail industry recently and drivers there don't have to pay a bond before training, they only have to pay if they leave the company within x years. Given that the training cost is broadly the same, the bond doesn't seem to make sense, especially when an airline guarantees the loan.
How come airlines can't simply include a payback clause where if the pilot leaves, the pilot is liable for some/all of the cost?
I've been looking into the British rail industry recently and drivers there don't have to pay a bond before training, they only have to pay if they leave the company within x years. Given that the training cost is broadly the same, the bond doesn't seem to make sense, especially when an airline guarantees the loan.
How come airlines can't simply include a payback clause where if the pilot leaves, the pilot is liable for some/all of the cost?
de minimus non curat lex
Historically the airline would provide the training, you would sign a bond for £ xx
over three years reducing monthly on a straight line basis. A perfectly reasonable arrangement.
Then nothing reduced in year one. Reduction only in the last two years. Not so reasonable.
Then cliff edge. No reduction until full term completed. Unfair and probably not enforceable. All this driven by the beancounters. Discourage you going to pastures new.
Then you had to pay for the type course, taken from your salary over say 3 years.
Now you pay up front in full for the course. Sound familiar ? Some outfits then repay the course monthly over xx years.
Unless and until, junior birdmen stop "volunteering" to folk out, this will remain the status quo.
Hugh debts amass with interest. Monthly salary hardly cover the repayments. Some have declared themselves bankrupt..........and eventually start again, debt free (of sorts) but with restrictions for sometime.
Driven purely by supply and demand. It is that simple.
At least Aer Lingus are opening it up, irrespective of financial situation.
over three years reducing monthly on a straight line basis. A perfectly reasonable arrangement.
Then nothing reduced in year one. Reduction only in the last two years. Not so reasonable.
Then cliff edge. No reduction until full term completed. Unfair and probably not enforceable. All this driven by the beancounters. Discourage you going to pastures new.
Then you had to pay for the type course, taken from your salary over say 3 years.
Now you pay up front in full for the course. Sound familiar ? Some outfits then repay the course monthly over xx years.
Unless and until, junior birdmen stop "volunteering" to folk out, this will remain the status quo.
Hugh debts amass with interest. Monthly salary hardly cover the repayments. Some have declared themselves bankrupt..........and eventually start again, debt free (of sorts) but with restrictions for sometime.
Driven purely by supply and demand. It is that simple.
At least Aer Lingus are opening it up, irrespective of financial situation.
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Parkfell is absolutely right. It used to be that a 'bond' was a promise to pay for the costs of a new type rating if you left the airline shortly afterwards. Nowadays you can be asked to pay for a type rating up front in cash.
A 'bond' for initial training is one of the more cunning financial devices used to optimise the profit for the bigger FTOs. It can allow the FTO to take all the loot without having to charge VAT, if the payment from the cadet to the company for the training is called a loan it doesn't attract VAT. Great for the FTO, they just got 25% more income. We will now call the loan a 'bond'.
On hiring the 'bond' is sold to the end user airline which then 'repays' the cadet instead of paying part of the salary. This is the reason why 'cadet' airline salaries are often less than those normal FOs get, 'bond repayments' make up the difference, or some of it. Carefully written contracts can prevent cadets getting the money they 'lent' to the FTO back in any other circumstances.
I don't know the terms of CTC's offer to repay training costs if you fail. I suspect you would have to look at the contract quite carefully to fully understand it.
A 'bond' for initial training is one of the more cunning financial devices used to optimise the profit for the bigger FTOs. It can allow the FTO to take all the loot without having to charge VAT, if the payment from the cadet to the company for the training is called a loan it doesn't attract VAT. Great for the FTO, they just got 25% more income. We will now call the loan a 'bond'.
On hiring the 'bond' is sold to the end user airline which then 'repays' the cadet instead of paying part of the salary. This is the reason why 'cadet' airline salaries are often less than those normal FOs get, 'bond repayments' make up the difference, or some of it. Carefully written contracts can prevent cadets getting the money they 'lent' to the FTO back in any other circumstances.
I don't know the terms of CTC's offer to repay training costs if you fail. I suspect you would have to look at the contract quite carefully to fully understand it.
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Hopefully with the introduction of the new Aer Lingus programme, other airlines will follow suit. They've yet to reveal the nature of the bond, though unless it is a "pay-up-front" one it will likely be the best programme in years. I wonder if BA would match it should they replace the FPP (since both are IAG). I'd love to see the Hamble-style programmes return. Even if Easyjet started guaranteeing the loans that would be a massive improvement.
With the railways there are some fearsome standardised aptitude tests (which I've been lucky enough to pass) which seem to remove about 90% of applicants from the process. The results are valid for up to five years and can be used to apply to any Train Operating Company. A candidate is only ever allowed to fail once in their life.
I do think that if BALPA was as powerful as ASLEF, Ts & Cs for pilots would definitely be better. The mention of the tax avoidance element of the bond does seem like an accountant's dream to be honest. It appears to clear up why one or two airlines insist on a loan despite offering to guarantee it.
With the railways there are some fearsome standardised aptitude tests (which I've been lucky enough to pass) which seem to remove about 90% of applicants from the process. The results are valid for up to five years and can be used to apply to any Train Operating Company. A candidate is only ever allowed to fail once in their life.
I do think that if BALPA was as powerful as ASLEF, Ts & Cs for pilots would definitely be better. The mention of the tax avoidance element of the bond does seem like an accountant's dream to be honest. It appears to clear up why one or two airlines insist on a loan despite offering to guarantee it.
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UMM! I can't think of any cases where an airline or training school refunded a students costs just cos they failed a test. If you read the fine print of such offers it often says they will let you do the test again for free etc.
There are 2 main reasons why Wanabee airline button pushers are still paying up front for basic training or type ratings. Firstly there are far too many rich kids still left in the EU and secondly the airline management don't think pilots matter (Cos the accident rates are lower than they were in the old days), so just concentrate on short term bean counting.
Some of the senior managers also have a great dislike of pilots and think training bond slavery is a great idea!
The situation in the US is very different as although Wanabee pilots still pay for their training, the P2F game is dead and the regional airlines are even paying for both ATP and type ratings! The general pay situation has not improved yet, although some airlines are offering sign up bonus schemes IF you already have the required type rating. The cost of an FAA P2 type rating on a 737 is about half that of an EASA one (It's about 10K usd).
Although I got trained for free, if I was a new Wanabee button pusher, I would only sign up if an airline like Air Linctus or British Hairways underwrote the bank loan. I would never use my own money OR be daft enough to use my parents house or pension plans to underwrite a loan. That way if you discover that sitting in a seat half the day, pushing buttons or filling in tedious paterwork whilst wondering just what thin air, airline food and stress will do for your health, you can always empty out your own savings and do a runner!
I took my dosh to a bank in the Canary Islands who then issued me with new charge cards whilst the company I worked for figured out what to do about some money I owed them. Luckily they went bust before taking legal action!
PS: The best job I ever did was on a fishing boat. Plenty of clean fresh air, lots of exercise and great seafood!
I even got promoted to captain when the old skipper got washed overboard gaffing a shark (I managed to get him back, but lost a nice Mako).
My idea of real flying if you light heavy metal:
https://www.youtube.com/watch?v=7QJTZXl_5BE
There are 2 main reasons why Wanabee airline button pushers are still paying up front for basic training or type ratings. Firstly there are far too many rich kids still left in the EU and secondly the airline management don't think pilots matter (Cos the accident rates are lower than they were in the old days), so just concentrate on short term bean counting.
Some of the senior managers also have a great dislike of pilots and think training bond slavery is a great idea!
The situation in the US is very different as although Wanabee pilots still pay for their training, the P2F game is dead and the regional airlines are even paying for both ATP and type ratings! The general pay situation has not improved yet, although some airlines are offering sign up bonus schemes IF you already have the required type rating. The cost of an FAA P2 type rating on a 737 is about half that of an EASA one (It's about 10K usd).
Although I got trained for free, if I was a new Wanabee button pusher, I would only sign up if an airline like Air Linctus or British Hairways underwrote the bank loan. I would never use my own money OR be daft enough to use my parents house or pension plans to underwrite a loan. That way if you discover that sitting in a seat half the day, pushing buttons or filling in tedious paterwork whilst wondering just what thin air, airline food and stress will do for your health, you can always empty out your own savings and do a runner!
I took my dosh to a bank in the Canary Islands who then issued me with new charge cards whilst the company I worked for figured out what to do about some money I owed them. Luckily they went bust before taking legal action!
PS: The best job I ever did was on a fishing boat. Plenty of clean fresh air, lots of exercise and great seafood!
I even got promoted to captain when the old skipper got washed overboard gaffing a shark (I managed to get him back, but lost a nice Mako).
My idea of real flying if you light heavy metal:
https://www.youtube.com/watch?v=7QJTZXl_5BE
Last edited by skyship007; 27th Sep 2015 at 12:19.
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I have just looked at CTC's site, the offer on the Easyjet MPL course seems quite simple:
"A refund of fees (less a £5,000 deductible) should we cease your training due to your competence falling below the minimum required professional pilot issue standard"
The 'minimum required .... issue standard' presumably means persistent and total failure to pass either the ATPL theory exams or the CPL skills test. If so, that is quite unlikely. If it did happen to a pre-selected cadet you'd have to question the effectiveness of all those selections and aptitude tests.
It looks like a perfectly valid offer but I doubt they ever expect to have to pay out on it.
"A refund of fees (less a £5,000 deductible) should we cease your training due to your competence falling below the minimum required professional pilot issue standard"
The 'minimum required .... issue standard' presumably means persistent and total failure to pass either the ATPL theory exams or the CPL skills test. If so, that is quite unlikely. If it did happen to a pre-selected cadet you'd have to question the effectiveness of all those selections and aptitude tests.
It looks like a perfectly valid offer but I doubt they ever expect to have to pay out on it.
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Doubt it, it says 'competence'. That would be a matter for loss of licence insurance. It would be interesting to see a full contract for one of these courses one day.
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Resigning
Chris the Robot:
How come airlines can't simply include a payback clause where if the pilot leaves, the pilot is liable for some/all of the cost?
Most if not all (Not too sure about the new Air Lingus contract) airlines will stick you with the bill if you decide to leave.
That makes the new pilots virtual slaves and slaves can do some silly things when they want to escape, just ask a Germanwings captain!
EASA and the FAA should pass a new regulation that makes sure that any pilot who wishes to hand in his license can do so without financial consequences. They know that it's right, but it will take another suicide to get them to act.
How come airlines can't simply include a payback clause where if the pilot leaves, the pilot is liable for some/all of the cost?
Most if not all (Not too sure about the new Air Lingus contract) airlines will stick you with the bill if you decide to leave.
That makes the new pilots virtual slaves and slaves can do some silly things when they want to escape, just ask a Germanwings captain!
EASA and the FAA should pass a new regulation that makes sure that any pilot who wishes to hand in his license can do so without financial consequences. They know that it's right, but it will take another suicide to get them to act.
Last edited by skyship007; 1st Oct 2015 at 07:10.
