A global survey of senior managers from the industry and across the aerospace supply chain by executive search firm Heidrick & Struggles has revealed some worrying shortages in engineering skills
When it comes to recruiting the right skills, the world's airlines have barely kept up as traffic has soared in recent years. The shortage of top executive and engineering talent is starting to cause problems which, if allowed to linger, will have a deep-rooted effect on the ability of airlines to continue expanding.
The supply of graduates isn't the only issue. It is the depth of experience that is lacking, as well as exposure to new and developing technologies. Big challenges are predicted for five to 10 years down the track.
Cebu Pacific chief operating officer Brian Hogan says the shortage of both skills and experience is broad-based and only partly solved by outsourcing. "There's a real lack of talent coming through the ranks," he says. "Is it because the airline business is growing so fast, especially with the low-cost carriers? Is it because we're outpacing the schools and the middle management? I'm not sure. But what I do know is that the depth of experience given to graduates these days is not as comprehensive as it used to be."
Manila-based Cebu Pacific has a core team of about 16 engineers, with much of the work outsourced to Singapore Airlines Engineering. "In addition, we rely a lot on our original equipment manufacturers and our partners to provide the analysis information that we need," Hogan says.
"In the airline industry I am seeing a lot of one-dimensional engineers. I don't see a lot of multi-dimensional ones," he adds. "There is a big shortage of the type of engineers who can understand the warranty requirements, the repair, the manufacturing, as well as being cross-functional. In the aviation business you have to learn as much as you can about structures, composites, hydraulics: the whole gamut of systems."
Hogan says the industry is still recovering from the downsizing of earlier years. "These very experienced guys who'd been in the business 30 or 40 years jumped at these packages because it gave them the opportunity to retire early - but it has taken us years to recover from the loss of those experts."
Shortages have combined with spectacular growth in the industry. Hogan says that in his market, growth is 89% year-on-year, "admittedly from a low base". Over the next five to 10 years he expects a 40% increase each year. Exacerbating the problem is global competition. Engineers are constantly being "poached" by Asian and Middle Eastern rivals. The answer, according to Hogan, is to focus on key leaders, functional heads, managers and chiefs to ensure they are properly incentivised to stay.
Lack of talent
The shortage of engineering talent is the most widely predicted aviation crisis of the 21st century. In the USA, because of the military implications, a presidential commission was established in 2003 and predicted a "devastating loss of skill, experience and intellectual capital". The numbers tell part of the story. The first of the baby boomers have started retiring, and in the USA people are turning 50 at the rate of eight a minute. At the executive level, the scarcity of people who understand the building blocks of project success is even more acute.
The situation is exacerbated by the increasing complexity of projects. The global Heidrick & Struggles survey has revealed that difficulties are emerging both in terms of the shortage of high quality engineers and in the ability of airlines to manage projects in a timely manner. The survey of 112 executives, from C-level and general managers to functional leaders, regional heads and human resources executives, shows that the shortage of quality entry-level engineering talent will adversely affect the competitiveness of organisations in the medium- to long-term. Executives surveyed also say that flatter management structures - a reduction of the number of layers - have affected the ability of their airlines to grow potential leaders who are capable of taking larger responsibilities. As a result, they have been forced to recruit from outside the industry to fill key functional and general leadership positions.
At Heidrick & Struggles, we are noticing a big gap between the attitudes of OEMs and airlines. In general, airlines until recently have appeared less worried about the growing technical shortages - partly because they have been preoccupied by competitive forces, including the growth of low-cost carriers.
And while general managers are aware of the growing problems caused by shortages, functional leaders seem to be less aware. Low-cost and regional airlines in general don't seem to offer in-house training, while their more established rivals are keeping their engineering teams up to speed.
"The biggest issue is finding engineers who are committed to engineering long-term," says one respondent to our survey. "Most engineers feel the only career path is now through management and growing their commercial and financial or business skill sets. Very few, if any, aspire to vice-president of engineering roles. And we are finding that others want to move into the sales vice-president roles, which are well rewarded."
The competencies of the executive engineering roles are also changing. To the deep functional skills must be added commercial acumen and strategic thinking. An overwhelming majority of survey respondents say that future leaders will need high levels of business understanding, with 65% strongly agreeing that these skills would be needed and 27% agreeing "a little". Across the board, a third of the respondents point to shortages and difficulties in recruiting top talent.
Former Delta Air Lines senior vice-president of technical operations Ray Valeika believes the knowledge that has left the airline industry must be attracted back. In addition, "we need to make the job interesting for the younger crew. The boomers were prepared to work long hours, but the new generations are demanding more flexibility."
Valeika says China and India are booming at the levels western airlines were 10 or 15 years ago. "They are evolving their management structures and styles, and are better at managing their complex organisation, so they are catching up. They are not in the forefront, but there is catch-up and there is a tremendous amount of excitement."
As for the more developed nations, Valeika says that "there's a whole new world out there - airlines probably won't be in maintenance for too much longer. There will be exciting new frontiers being developed, but there is a tremendous reluctance on the part of labour, and on the part of management, to drive these changes forward."
The Heidrick & Struggles survey pointed to some regional differences in how the talent crisis is unfolding.
Executives surveyed in North America say the combination of large-scale outsourcing (even of core competencies such as integration tasks) and the high degree of specialisation within the OEMs make the industry less competitive compared with Europe and emerging nations. The outsourcing trend is leading to a shortage of leadership candidates with a good understanding of the technical complexities of the aircraft industry, as well as of the industry in general - financing, human resource, supply chain, product strategy and markets.
One respondent says: "Europe is trying to ride the same dead horse (outsourcing) and playing catch-up with North America. But rising nations are studying much more closely what makes sense and what doesn't. They may not fall into the same trap. The risk is that the aerospace industry in North America and Europe may face the same fate as the US automotive industry. The aerospace industry in the western nations might lose its leading role much faster than anticipated today."
Quality engineering talent is hard to attract and retain, particularly in China and Japan. Respondents say it is a challenge finding English-speaking engineers and leaders who also understand local customers and products and who are also good communicators. Having to choose from the English-speaking management candidates limits the talent pool and is causing some companies to feel they may be about to lose their competitive edge.
"Many Asian engineers are too structured in their approach," says one survey respondent. "When it comes to a common problem and its routine they will make their way through it, but when it comes to a problem that is different from the routine problem, they have a difficult time thinking about a new way to solve it. Middle-grade engineers who will be leaders shortly have a lack of vision and should be moved from one process to another in three to four years. This will make them sharper."
Emerging and developed nations
Meanwhile, as Europe, the USA and Australia are trying to find emerging engineering talent in Asia, the boom in aviation and the competing technology sectors in China, India and the Middle East is creating scarcities in those regions as well. Talented engineers are being paid more, and salary scales across the world are equalising.
But according to a study by McKinsey Global Institute, young engineers coming forward in China may not be enough to meet even local demand. China has 1.6 million young engineers and 33% of university students study engineering - compared with 20% in Germany and 4% in India. But the main drawback is the educational system's bias toward theory. Compared with graduates in Europe and North America, who work in teams to achieve practical solutions, Chinese students get little practical experience. So the number that are considered suitable for work in multi-nationals is just 160,000 - about the same number as are available in the UK.
Poor English-language skills are also a limitation for multi-national companies seeking to source engineers.
India's outsourcing industry is snapping up engineering talent almost as fast as it can be produced. The National Association of Software and Service Companies (Nasscom) forecasts a shortage of 500,000 professional employees by 2010. Universities and private colleges may be hard-pressed to keep up with the demand.
Solutions to the impending crisis include:
Industry insiders say the only way to mitigate risk in the short-term as aircraft become more technically complex is to find talent in other organisations. "You can identify the gaps and try to fill them, but this is defeatist over the longer-term," one executive says. "The best thing is to identify great people in other fields who can be brought into aerospace. Then of course you will want to ensure you have good training and links with schools at the graduate level."
Chris Doan, the chief executive of consulting firm TeamSAI, says the best approach to engineering shortages is to instill in the younger generations the "passion and potential" available in the industry. "We are seeing a huge demand," he says. "In the next 10-20 years we will need another 25,000 new planes and there is no reason that we would stop growing, so we need lots of people to be able to help us. But we have to bring back the passion of the job or we will face some difficult times."
EADS chief technical officer Jean Botti says if airlines in Europe, the USA and Australia want to stay competitive, they need to invest more aggressively in technical skills. Botti says that he spoke to a Chinese executive recently who told him the country was graduating a total of one million engineers this year, and 15,000 lawyers. "I said, 'Wow, that's amazing' and he replied, 'Yes - too many lawyers'."
About the author
Torbjörn Karlsson leads the Aviation, Aerospace & Defence Practice of Heidrick & Struggles in the Asia Pacific. He is also involved in the transportation and supply chain sectors. Before joining the company he was vice-president commercial Asia Pacific for Honeywell Aerospace. He is based in Singapore and can be reached on +65 6332 5001.