Airline Pilots –  salaries and income tax reforms

By Capt Gihan
A Fernando, MBA

Honorary Life Member, Air Line Pilots’ Guild of Sri Lanka (affiliated the International Federation of Air Line Pilot Associations)
Former Secretary, Air Ceylon Pilots’ Guild and Air Line Pilots’ Guild of Sri Lanka
Former Member Air Line Pilots’ Association Singapore 
Life Member Organisations of Professional Associations (OPA)

It is no secret that Sri Lankan airline pilots engaged in international flying are highly paid and therefore in the country’s highest slab of income taxation. Their income is received direct from their employer. Their profession is strictly regulated and they cannot engage in private practice, unlike many other professions.In 1947 when Air Ceylon was formed, a DC-3 Dakota Captain’s maximum basic salary (without allowances) was Rs 800 per month. The Ceylon Air Line Pilots’ Association (CALPA) and later the Air Ceylon Pilots’ Guild (ACPG), as it was then known, tried but failed to negotiate for higher salaries. One Air Ceylon Chairman (who was known as ‘our man in Bonn’ at one time, and father of a present Member of Parliament) even asked how the Pilots’ Guild had the audacity to ask for salaries over and above what he was earning.

That status quo remained almost the same until 1977, when the Secretary of Defence, General Don Sepala Attygalle, declared that the Army Corporal who drives his car was earning almost the same wage as airline pilots, and increased pilots’ salaries all round by Rs. 1,600 per month.

Then in 1979, when Air Lanka was established, national pilot salaries underwent another increase with ‘per diem’ allowances matching international standards. The standard method of calculating these allowances is based on the crew duty time starting one hour before departure time, and finishing half an hour after landing. For want of a better method, traditionally there was a certain value added to breakfast, lunch and dinner; and if the crew member was on duty during those meal times, a ‘Meal Allowance’ was paid.

Additionally, if a night was spent overseas the crews were paid an ‘Overnight Allowance’. All allowances were the same for Technical (flight) and Cabin Crew, except for the ‘Overnight’ allowances where the Captain got a little extra to cover tips, porterage, etc., in local currency. In those days the overseas meal and overnight allowances were frugally saved by many Sri Lankan crew members and encashed into rupees in Colombo in order to supplement their take-home pay.

Even during Air Ceylon days, the Internal Auditor didn’t understand the concept of per diem payments based on meal times, and commented that crews were not entitled to meal allowances when flying as they were provided with meals on board. It took the Air Ceylon Pilots’ Guild quite an effort to counteract that notion.

Increasing flight crew salaries to present levels was the result of a long, hard struggle for the Airline Pilots’ Guild, as Air Lanka was truly ‘international’, with expatriate crew members on its payroll too. In the mixed (Sri Lankan and expatriate) crews, a ‘national’, or local, Captain earned far less than an expatriate First Officer or Flight Engineer, who also received free housing and children’s education fees as part of their remuneration packages.

Yet the Captain, whether a Sri Lankan or an expat’, was the most senior crew member in the aircraft. Further to regular appeals to Air Lanka Management, in due course the salaries were adjusted to a great extent and tied to the constantly appreciating US dollar, so as to eliminate the salary gap between nationals and expatriates. The Pilots’ Guild also managed to secure duty free car import/purchase permits for its members, in keeping with certain other professions at that time.

In accordance with the then Sri Lankan tax laws, while an expatriate’s salary was tax free, a national captain had to pay income tax amounting to around 40% of earnings. Again, after many appeals from the Pilots’ Guild, Air Lanka management agreed to pay flight crews’ income tax, which was then considered a perquisite by the Government Income Tax Department, and necessitated the airline management paying ‘tax-on-tax’. This was done to prevent pilots leaving the company for better jobs in other parts of the world.

So why is an airline pilot is paid so much?

Let me give you a few reasons. An airline pilot must undergo an annual medical examination up to the age of 40, and then regular biannual medicals until the age of 60. From then until age 65 additional blood tests and stress EKG tests are conducted. While pilots need not be as fit as astronauts, there cannot be any disqualifications either. Unfortunately, the limits of these tests are quite subjective and could be a source of worry and stress to individual pilots. Needless to say, pilots must practise self-discipline to maintain these medical standards.

The training regime to become a commercial pilot is long and extensive. There are as many as 14 theory exams to pass, along with numerous practical tests where competency has to be demonstrated to an examiner and recorded for licensing purposes. The pilot needs to qualify for: a ‘Type Rating’ to fly a particular type of aircraft; an Instrument Rating to enable himself/herself to fly solely with reference to instruments at night-time or in conditions of limited or non-existent visibility; a ‘Multi-engine Rating’ authorising him/her to fly an aircraft with more than one engine. They must also be current on Safety Equipment Procedures, which involve going down emergency slides into a pool or tank of water, and survival in case of a ditching at sea.

Even after obtaining the requisite licence and ratings and joining an airline, every six months a pilot must submit to a practical test conducted by a Civil Aviation Authority Sri Lanka (CAASL)-designated examiner in order to demonstrate continuing competency. Throughout his/her career, every year the pilot must also satisfy a company-designated ‘Line Examiner’ that he/she is up to date on all company procedures and instructions. The pilot could be failed and given re-enforcement/consolidation training at any time.

In contrast, not many vocations, including the medical profession, have such systems in place for rigorously and regularly monitoring and recording competency and proficiency. Sadly, such testing can be subjective by nature, and is sometimes used by airline companies the world over to force pilot employees to ‘fall in line’ and not rock the boat. But that’s another story.

The demand for qualified and experienced pilots around the world is high, especially as airlines are bouncing back after the pandemic. Therefore, Sri Lanka’s national carrier must find incentives in pay and conditions to keep experienced pilots within their fold. Losing experienced pilots to a ‘brain drain’ will affect the airline’s safety record in the long run. Airline Captains cannot be produced overnight. It takes at least six years on average for a good First Officer (FO) to become a Captain. That gives the FO experience to fly through all the seasons of spring, summer, autumn and winter weather, by day and night, at least six times under the watchful eye of an experienced Captain, before the FO goes out on his/her own. Not unlike a ‘House Officer’ in the medical profession, who learns what to do, as well as what not to, to enhance his/her ability to work with others in a ‘team’ environment.

Commercial airline pilot training is expensive, with ever-rising costs of equipment and fuel. Unless the trainee is sponsored by an airline, or has wealthy parents, many student pilots will incur debt. It is not unknown for some not so well-to-do parents to even mortgage their property to put their children through flight school. Yet at the end of it all one is still not sure of securing an airline job because even in the ranks of prospective flight cadets, many are called but only a few are chosen for further training by the airlines.

It is no secret that an airline pilot’s work is unique and different from a regular 9 to 5 job. Flying duties take pilots far from home, while they miss out on family events such as birthdays, weddings and funerals of near and dear ones. It is very hard on the pilot’s spouse as he/she has to be both father and mother, nursemaid, and chauffeur, especially when children fall ill. Airline pilots have to be mentally prepared for such events, and free of financial worries and stress that can cloud judgement and decision-making when performing flying duties and functions that are stressful in their own right. It must be remembered that apart from being responsible for hundreds of lives, an airline pilot is in charge of and responsible for airline assets costing hundreds of millions of dollars, leaving no margin for error; as distinct from a run-of-the-mill administration job which, according to some, allows for as much as a 50% error margin.

An airline pilot has to be trained and tested regularly in a flight simulator or an actual aircraft to safely handle emergency situations such as engine failures or fires on take-off, rejected take-offs, emergency landings with hydraulic failure, cabin pressure failure, and many other potentially perilous situations. A wrong decision will be very costly for the airline, and could even make the company go ‘belly up’.

There is a famous saying among aviators which is attributed to Jerome Lederer, the then President of the Flight Safety Foundation. He stated: “If you think that safety is expensive, try having an accident.”

That also brings to mind what Lee Kuan Yew, widely acknowledged as the ‘founding father’ of modern Singapore, said: “If you pay peanuts, you get monkeys.”

In 1776, the Scottish economist and moral philosopher Adam Smith wrote a book called ‘The Wealth of Nations’. In it he outlined five principles underlying why labour rates are different. They are still valid today. I quote:

“The Variation of Labour Rates

There are five major factors that explain why labour wages differ from one occupation to the next. To begin, labour rates differ depending on how simple or difficult the job is. A tailor, for example, is paid less than a weaver. His job is much easier. Weavers earn less than smiths. The most despised of all jobs, public executioner, is paid more than almost any other common profession in proportion to the amount of labour done.

Second, the ease and low cost of learning a new business, as well as the difficulty and cost of doing so, affect labour salaries.

Third, salaries in professions differ because some crafts have significantly more consistent employment than others.

Fourth, labour wages vary according to the amount of trust that must be placed in the workers. Goldsmiths and jewellers are always paid more than many other workers because they are entrusted with valuable materials.

Fifth, labour remuneration varies according to the likelihood or improbability of success. If 20 people apply for a job and only one is hired, the one hired is usually paid the sum of the salaries of the other 20.”

In addition, Smith states a few more home truths, such as:

“Give me what I want, and I’ll give you what you want.”

and

“A man must always be able to support himself through his job, and his earnings must be sufficient.”

Many airline administrators take Aviation Safety for granted. It does not happen automatically but with hard work put in by the people in the front line, such as pilots, engineers and mechanics. Unfortunately, aircraft can’t fly without pilots and engineers. In the love/hate relationship between the Sri Lankan Airline Pilots’ Guild and airline management, the usual cycle of events since inception is as follows.

The Board of Management appointed by the ‘powers that be’ consist of government cronies who confess to the airline employees that they know nothing about running the airline and ask for guidance. The unions, including the Pilots’ Guild, give them support and guidance. After a few months the Board members believe they have learned all they need to know, and try to ride roughshod over the unions while trying to control traditional behaviour despite really knowing nothing. It is a truism that ‘a little knowledge is a dangerous thing’. The pilots are considered ‘a necessary evil.’

Speaking for the pilots at the ‘pointy end’ of the aeroplane, they see the product of that ‘board management’ at its worst and best. The communication channels should be kept open with the Chairman and his Board of Directors. From what I gather, and in aviation terms, there is “a loss of com” between them.When the COVDI-19 pandemic began, the present Board of SriLankan Airlines unilaterally reduced pilots’ salaries by almost 50%, put a cap on the dollar conversion rate, and told pilots that if they didn’t like it that they could go look for jobs elsewhere. The Pilots’ Guild went to the Labour Commission, who discovered that the airline’s management had short-changed the pilots to the extent of Rupees 1.928 billion! It is obvious that management should not look at the bottom line only but follow a Safety Management System which ensures resilience.

Now other airlines are hiring again, and 130 Sri Lankan pilots have applied to convert (validate) their Sri Lankan ICAO (International Civil Aviation Organisation)-recognised Air Transport Pilots’ Licence (ATPL) in other countries to be able to work there. More than 40 local pilots are expected to leave for other reputed airlines by February 2023. If that occurs, it will become a national crisis. This attrition will in turn cause disruption of scheduled flights in the short term, or the airline might even cease operations in the long term. It has happened to other airlines. Sri Lanka is not and will not be immune. Yet, SriLankan Airlines’ Board of Directors seem to be blissfully oblivious of this fact.

With the proposed national Income Tax reforms, the quantum of income tax is going to be higher. Could the Board of Directors of SriLankan Airlines consider income tax payments and pay tax-on-tax where pilots are concerned, as has been done before? They can ill afford to hire expatriate pilots at ‘exorbitant’ dollar rates, as in the past. Or by ‘sitting on their hands’ would the Directors force national airline pilots to leave for greener pastures abroad, along with Sri Lankans in many other valued and respected professions?