CARES2 has been passed and the US airline industry has a little more breathing room to start off 2021. Many airlines and associations (such as IATA) are projecting a robust rebound with assumptions that passenger demand will surge as quarantine fades and more locations fully open.
While I am optimistic that we could see a solid recovery this year, there is a chance that some airline families may still find themselves facing challenging times ahead. In fact, the TSA passenger count is still less than 50% of pre-COVID levels and bargain airfares are reducing revenue further so we are not out of the woods yet.
Many of us had our nerves tested in 2020 as we watched years of investment gains evaporate and then rebound within weeks and months. We believe you should not change your investment asset-allocation to try to time the swings in the markets. However, you SHOULD change your allocation if you learned something about yourself and gained a better understanding of your personal tolerance for risk and volatility. Example: if you thought you could stomach an all-equity portfolio but found yourself wanting to sell in March 2020. Or you realized your conservative allocation was a little too defensive during the recovery, then do not let that crisis go to waste; revisit your investment risk tolerance and make changes if necessary.
For airline families, this is also a chance to re-evaluate the career-risk that is involved in our industry. This can range from quality-of-life issues like displacements and commuting all the way to devastating furloughs and uncertain income. The “Corona-Crash” has reminded us that the airline pilot job is great, but the career can be very challenging.
While we can’t change our jobs and careers as easily as we can change our portfolio, there are some actionable steps we can take now. Here are the Top 5 Action Steps that all airline families should consider especially if they feel their airline job is vulnerable to furlough at any time in the future.
Build a Sufficient Emergency Fund
How much is enough? Most rules of thumb suggest a minimum of 3 months of basic living expenses saved if you are married and have a working spouse with similar earnings. If your airline paycheck is paying the bills then you should have a minimum of 6 months, and potentially access to more cash if needed; potentially 9 to 12 months’ worth of basic living expenses.
Filing for Unemployment will be a valuable benefit.
How and when do I file? Unemployment is run by each state and the process can vary greatly depending on where you live. It is important to file on the first day you begin a potential furlough as some states can take time to process the claim, but you will get paid if you submit in time. Also, the maximum weekly pay can vary as well how long the benefits last. The federal government continues to add supplementary pay to the state benefits as well as extending the time before state benefits expire, so be aware that Unemployment benefits are a moving target.
Evaluate your Expenses
Develop a budget and stick with it. We like to call them spending plans. We all should have one but if you are preparing for furlough you should have a viable spending plan ready to go.
Health Care and Life Insurance
Life and Health insurance outside of company benefits could be a significant challenge. These options will vary greatly by airline. Nonetheless healthcare, life and disability insurance coverages are items to always plan for, especially if preparing for tough times ahead.
Invest in Yourself
It is easier to say when you are NOT furloughed, but we believe the only option if furloughed is to make the best of a difficult situation. Some previously furloughed pilots told us how it helped them get back to the basics. Furthermore, it helped them understand what is valuable in their lives such as family, health, and even hobbies they were not able to do before.
Interestingly, it turns out pilots can do other tasks besides fly airplanes! We know people right now that branched out into other careers and have done very well. We have friends and clients that developed skills in the IT, mortgage, and financial planning career fields. (About four of us at this firm)
Let this pandemic be another reminder that the airline industry is volatile and vulnerable to events out of our control. However, we can control how we prepare our personal finances to make the tough times a little more manageable.
What other actions can you take to prepare your airline family for some possible additional turbulence ahead?
We appreciate your feedback, and we are available for your questions and concerns. Please don’t hesitate to call our office (865-240-2292) or email our team. You can reach me personally at Mark@leadingedgeplanning.com.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 01/19/2021 and are subject to change at any time due to the changes in market or economic conditions.