Financial Planning for Professional Pilots

As a pilot you have probably long realised that your financial profile and needs differ considerably
from that of people doing ‘normal’ jobs. It is therefore quite likely that you struggle to find value in
‘general’ financial advice since most of the things that are recommended are simply not applicable to you.
This was written with you, the professional airline pilot. We trust that you will find the information
beneficial and that it will be a catalyst to help you make the decisions necessary to secure your long
term financial future. Make sure that your financial planning is in order before it’s too late.

We’ll begin by discussing some of the typical financial issues faced by pilots. This will be followed by
some practical suggestions on how you can make your money work for you now, and when your
flying career is over.

It is very difficult (and somewhat dangerous) to generalise when it comes to personal finances. We
are, however, quite certain that you will see at least something of your own financial profile in the
following description:

According to CASA becoming a pilot is COSTLY!

The time it takes to obtain a licence can depend on a number of factors such as whether you are undertaking full time training or on an ad-hoc basis, aircraft availability, weather and of course your financial situation. An average student will qualify for a private pilot licence after approximately 55-60 hours. If completing training on a part time basis, say 1 hour a week, this will take just over 12 months. Full time training will take about 2 months. For a commercial licence, the 150 hour course will take approximately 12 months full time. If you elect to undertake training on an ad-hoc basis, the minimum number of hours you must have will increase to 200hrs and this will take you between 2-3 years to acquire.
The cost of flying training will be a significant factor in your decision making. The cost will vary depending on the type of aircraft you fly (the more sophisticated the aircraft, the greater the cost), how often you fly (spreading your training over a long period will invariably mean more hours to achieve your goal) and how quickly you pick up on what’s being taught. A rough guide on the cost of obtaining a licence follows:

. Private Pilot (Aeroplane) Licence – $8000
. Private Pilot (Helicopter) Licence – $17000
. Commercial Pilot (Aeroplane) Licence – $23000
. Commercial Pilot (Helicopter) Licence – $32000
. Instrument Rating – $10000 (aero), $14000 (heli) plus cost of PPL or CPL
. Air Transport Pilot (Aeroplane) Licence – $2600 + cost of CPL + cost of meeting 1500 hour experience requirement
. Air Transport Pilot (Helicopter) Licence – as for ATP(A)L

Prices do not include the cost of study material, licensing fees and medical examinations. Training requirements and therefore costs for helicopter licences can be reduced if you qualify for an aeroplane licence and then convert to helicopters.

Current estimates set training costs with CPL and 1500 hours (just multiply at $100 per hour at the very least) of experience are around $180,000. Getting the right ratings and endorsements in place will add a further $50,000 before a pilot even begins his/her career. These costs mean that most pilots enter the profession with a significant amount of debt to pay off – just as broke as an MBA graduate from Harvard or Yale.

Delayed earnings curves

It is true that some pilots earn very large salaries. This is, however, certainly not true of all pilots. Salaries in the airline industry are very dependent on rank with the highest salaries only achieved once a pilot moves into the captain’s seat.

This status can take some years to achieve which means that pilots will have to deal with significantly lower salaries while they
work their way up through the ranks. It is therefore not uncommon for pilots to reach their top
earnings potential much later than members of other professions and to do so at times when they
have significant other financial commitments (e.g. private school fees, mortgages etc.). The upshot
of this is that many pilots find it difficult to save for retirement.

A struggling industry

Airlines are currently experiencing very difficult operating environments,
with many airlines having to cut back on flights. This has resulted in widespread layoffs and
reductions in working hours and remuneration. Many flight personnel are therefore dealing with
significant job insecurity and the possibility of the loss of income.

Vulnerability to negative health outcomes

Health problems that would merely be inconvenient
for ‘normal’ workers (e.g. deteriorating eyesight) could be career stoppers for airline pilots. Add to
this the fact that burn-out is increasingly common among airline pilots, and it becomes clear why
many pilots have to leave the profession well before official retirement age. It goes without saying
that such a move could lead to a significant reduction in income if proper income protection
strategies are not in place.

Vulnerability to litigation and loss-of-license

Commercial Pilots work in high stress environments where even a small mistake could lead to expensive litigation and even the revoking of a license. Asset protection should be a key. Unfortunately many pilots are inadequately protected against
the cost and loss of income that could result from adverse events.

Cash rich, time poor

Pilots at the higher end of the spectrum earn significant incomes
based on a significant amount of time in the cockpit. This means that many pilots do not have the
time, or the energy, to devote focussed attention to financial planning when they are not flying.
All of the above should make it clear that, although many pilots have access to relatively high
incomes, their financial position is certainly not as rock solid as the big pay cheques would suggest.
A very wise person once remarked: “Unless you tell your money what to do it will simply go
walkabout!” As a very busy professional you may struggle to find the time to draw up a budget. We
want to emphasise that this should be the highest priority. A personal budget is absolutely essential
for anyone wanting to secure his/her financial future. It is even more important in cases where your
income exceeds your day-to-day needs (which may be the case if you are currently at the top of the
profession) as it will serve as a mechanism to keep you from inadvertently spending funds that
should last you a lifetime. Some basic principles of budgeting include the following:

Budgeting and Goals

This may seem like a complete no-brainer, but disregarding this rule sits at the heart of most budget
related woes. It would perhaps be possible to live beyond your means for a few months or even years, but this kind of lifestyle
will exact its toll sooner or later, usually in the form of crushing financial difficulties. The basic
function of a budget is to ensure that you do not cross the line into spending money that you
do not have.

Debt Management – Get Rid of Non-deductible debt quickly

It is totally unrealistic, for most people at least, to go through life without ever taking on any debt. The important thing to remember is that not all debts have been created equal. Some kinds of debt (e.g. a mortgage) can have
positive effects on long term financial health as it helps to secure capital assets. There are,
however, other kinds of debts (e.g. high interest unsecured loans, credit card debts and ‘high
end’ vehicle finance) that are almost guaranteed to keep your personal budget from


One of the most common financial mistakes that people
who are not in debt make is to simply assume that a lack of debt will automatically translate
into a secure financial future. Nothing can be further from the truth! You will still have to take
care of your money with long term investment goals in mind. Not doing so is akin to simply
leaving your cash in a box under the bed!

Get ready for a rainy day

Even the best laid plans of mice and men can go awry and
there are usually some financial implications when they do! You should do your best to
protect yourself against unforeseen circumstances by taking out adequate insurance and the
creation of a ‘rainy day fund’ .None of us like to think about the possibility of difficult circumstances coming our way, but thinking
about it (and doing our best to prepare) is an essential part of financial planning. Doing this is
especially important for pilots, given the severe impact that a career stopping event could have on
your income.

The following elements should be combined to make sure that you are adequately

Get excellent income protection cover

We believe that Income Protection should be a key plank in the financial strategy of pilots.
However, many pilots have found that ‘general’ income protection
insurance policies do not meet their needs. This is because these policies were not designed to
take the pilot-specific factors mentioned above into account. Thankfully the insurance industry is
beginning to respond to the insurance needs of pilots by creating specialised pilot (and aircrew)

As a Pilot or Flight Engineer, you are responsible for people’s lives when you’re in the air. But down on the ground, it’s all about you and your family. Income protection for Commercial Pilots and Flight Engineers Income protection insurance protects your ability to earn an income should you suffer sickness or injury – providing financial security for you and your family. We will pay a monthly benefit of up to 75% of your income. You can choose between Income Care or Income Care Plus Cover.
. Total Disability based on ‘own’ occupation
. Benefit period two, five years or to age 60
. Maximum monthly benefit of $30,000*
. Partial Disability Benefit of two years
. Minimum 30 day waiting period
. Choice of Agreed Value or Indemnity.

There is not much to choose from as Tower and Asteron have withdrawn from the market, possibly due to a large volume of claims:

Comminsure: Income Care Aviation Cover for Commercial Pilots and Flight Attendants.

. Australian citizen residing permanently in Australia
. Holds an Australian Airline Transport Licence (Pilots) or Australian Flight Engineer Licence (Flight Engineers)
. Employed by a recognised fixed schedule commercial fare paying passenger airline operating within Australia
. Copy of current Civil Aviation Safety Association (CASA) medical examination and any additional tests or reports
. Minimum entry age 20 (next birthday)
. Maximum entry age 55 (next birthday)
. Expiry age 60 (minimum five year policy duration).

We highly recommend that you study the terms, conditions and benefits of each of these policies in
order to ensure that you choose one that is the best fit for you and your circumstances. It would be
even better if you get impartial, outside advice by having a financial adviser familiar with your
circumstances go through the policies on your behalf.

The reason why we recommend extensive research is the fact that the policies differ substantially in
the benefits they offer.

Some of the questions that you should ask before signing on the dotted line are:
-Will I be covered for ‘own occupation’ (i.e. will the policy pay out if I cannot work as a pilot)? And if ‘yes’, how could I structure it as part of my superannuation sighting recent legislative changes?
-Will I be covered only for base income or full earnings (base income plus allowances and

-What is the waiting period before cover will commence?
-Will I be covered only whilst at work or does the policy extend 24/7 cover?

Make sure that you are comprehensively insured: We believe that income protection insurance
is of critical importance for pilots (which is why it was discussed in a separate section). There are
also some other areas of insurance to which you should pay close attention.

Personal liability insurance: This will protect you from the impact of lawsuits or compensation
claims based on your actions in the cockpit. You may be covered for personal liability by a
policy arranged by your airline. It is advisable to find out whether this is in fact the case and
whether the level of cover is sufficient.

Loss-of-license insurance: The loss of your flying license, even temporarily, can have a
significant negative impact on your income. Loss-of-license insurance policies are often
provided by airlines. Again, it would be advisable to make doubly sure that you are indeed
covered at sufficient levels.

Life insurance: A good life insurance policy will ensure that your loved ones are financially
taken care of, even if tragic circumstances mean that you are no longer there to provide for

Some insurance companies market products aimed at pilots that combine some or all of the
different types of insurance listed above. Some of these policies represent good value for money
while others are nothing more than fancy ‘wrappers’ for standard policies (Putting ‘pilot’ on a
portfolio of products is no guarantee that it is indeed suited to the needs of pilots!) A competent and
independent financial adviser should be able to help you sort the wheat from the chaff.

Cash Buffer
Although taking out insurance is very important it should certainly
not be the sum total of your ‘rainy day preparations’. Increase your preparedness by establishing an
emergency fund that can only be accessed under certain predefined circumstances.

Get your Wills in order
Far too many professionals do not have a proper will in
place. This is a pitfall you should do your best to avoid for the sake of your loved ones. The
necessity of proper estate planning is even more acute if you have a relatively high net worth since
ill-defined or ‘unprotected’ estates can lead to massive tax liabilities and/or to your estate not being
distributed in line with your wishes.

It is our opinion that the key investment focus of pilots should be long term wealth creation. In
practice this would mean following a fairly conservative strategy geared toward securing a steady
income after your flying days are over. Your investment strategy should also ideally deliver lump
sum income to deal with major life events like the kids going to university, major relocations and

Only if you are satisfied that the ‘bases are covered’ by using a more conservative wealth creation
and preservation strategy should you even begin to consider more aggressive speculative
investments. Far too many investors have burnt their fingers at exactly this point. You can avoid
getting burnt yourself by:

-Being highly suspicious of ‘get rich quickly’ schemes. Responsible investment is much more
of a ‘get rich slowly’ affair.
-Diversifying risk. Putting all your financial eggs in one basket is asking for trouble and should
therefore be avoided at all costs.
-Always making use of the services of an independent and professional financial adviser
before making major investment decisions.

Tax matters
Many pilots are unsure about their tax positions and the deductions they might be able to claim.
Unfortunately this uncertainty often translates into under-claiming as a means of taking the easier
and simpler route to filling in a tax form. Obviously this approach can cost quite a bit of money over
the long term.
The best way you can protect yourself against giving Caesar more than his due is to spend some
time listening to what Caesar himself has to say. The Australian Taxation Office (ATO) maintains a
web page dedicated to tax issues, deductions and rulings relevant to airline staff. This page can be
found at and should be your first port of call before you begin to fill in your tax return.
If you make use of a tax adviser you should also make sure that he/she is aware of this resource before
work begins on your return.

Retire in style
Planning for your retirement should be one of the cornerstones of personal financial management.
Therefore it is imperative that you take the time to do a few projections of the likely state of your
finances in retirement. If the results of your projections are less than satisfactory you should
obviously do your best to improve the position as much as possible before you actually reach
retirement age.

The one area that you should pay particular attention to is the state of your superannuation fund(s).
Make sure that you regularly bolster your super by making personal contributions. There are two
distinct benefits to doing so: not only will you have more money when you reach retirement age, you
will also have grown your fund in a very ‘tax friendly’ way.
As you count down the years to retirement it is very important that you ‘stay on top’ with what is
happening with your super. Here are a few suggestions for doing so:

-Stay up to date: Make sure that you keep all documents relating to superannuation in one place and
that you carefully read all correspondence and statements. This will allow you to have a consistently
accurate picture of where your fund is heading.
-Keep your details up to date: The best way to prevent your super from ‘getting lost’ is to make sure
that your fund has your latest contact details.
-Make sure that your super fund has your tax file number (TFN): You may be paying more tax on
your super than you have to. Giving your fund access to your TFN will reduce the likelihood of this
-Consolidate your funds: If you have worked for a few different employers or airlines it may be that
you have small amounts of super in a few different funds. It’s worth investigating whether you will not
be better off combining these funds into a single super fund. This will make your funds easier to
manage and will, in most cases, reduce the fees and charges you are required to pay. The key
questions you will need to ask before you consolidate funds are: Are you losing valuable insurance
cover by doing so, or if the funds that you belong to charge such high ‘exit fees’ that moving will not
be worth your while.
-Keep a close eye on your fund: It is very important that you carefully read all correspondence from
your fund. This will, among other things, help you understand the investment approach that governs
your fund. You should also benchmark the performance of your fund against that of similar funds. If
you are unhappy with either the investment approach or performance (or both) it might be a good idea
to move to another provider. It is, however, highly recommended that you get professional financial
advice before doing so.

-Keep a close eye on the market and economy: Unless you want a repeat of Ansett, get yourself a good financial adviser who will act for you according to changes in economy, industry and markets. You don’t let an auto-pilot do all the work, so don’t leave your super to an empty cockpit.

-Take control: Consider a self managed superannuation to take control where your money is invested. It may workout much cheaper for you to pay few hundred dollars a year for accounting rather than pay 1%-3% on your balance each year.

Good luck.

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