For several years, the global aviation sector has been grappling with a pilot shortage, leaving airlines unable to meet market demands. While this has been going on for quite some time, it has become especially apparent post-COVID-19, when flight volumes must match the rapidly rebounding demand for travel.

In late 2022, a major US low-cost airline suffered a severe “meltdown” amid the holiday season travel rush. The airline canceled almost 17,000 flights, stranding around 2 million passengers. Staffing shortages were one of the factors behind the meltdown. This led to the airline being slapped with a record-high fine of $140 million by the Department of Transportation, along with passenger compensation of around $600 million.

According to a report by international management consulting firm Oliver Wyman, 62% of flight operations leaders it had polled in 2019 identified a shortage of qualified pilots as a key risk for the industry. The report also highlighted that the reasons behind the shortage vary by region. In China and other developing economies, airlines are struggling to keep up with the middle class’ growing appetite for air travel. Meanwhile, for the US and other mature markets, the pilot workforce is aging and being depleted by retirement, with not enough new pilots coming in to replace them. This is because fewer pilots are leaving the military to join airlines, and the very high cost of flight school training has become a huge barrier to entry for people who want to become pilots. This pilot shortage is growing, with demand increasing by 30% through the end of the decade, with a projected deficit of 13,000 pilots.

According to experts, the only way to solve the pilot shortage crisis is to recruit more pilots, but the cost of flight school has emerged as a major bottleneck.

Stratus Financial, a California-based lending company, seeks to disrupt this situation by providing student loans for prospective pilots. The company says its mission is to provide aspiring pilots with the financial assistance they need to take to the skies. Established by pilots for pilots, Stratus Financial’s unique model makes it the first private lender in aviation to provide instant credit approval, resulting in a 600% year-over-year increase in applications. It is also the first private lender to offer a no-shared-risk model, meaning that the flight school does not assume the financial burden or risk of their students’ loans. Stratus Financial completely underwrites, services, and funds the loans, transforming the way many flight schools approach funding. Its proprietary scoring system, which can take into account co-borrowers, helps its loan officers more accurately assess the credit quality of loan applicants.

Brandon Martini, Stratus Financial’s COO, is a former owner of a flight school, giving the company a unique insight into pilot and aviation culture and allowing it to speak their language. Additionally, the company’s CIO, Chris Ragland, and CEO, Anthony Geraci, have extensive backgrounds in private lending leading to an optimal combination of flight school operations and lending expertise.

To provide aspiring pilots with student loans for flight school, Stratus Financial has established an evergreen private credit fund, open to accredited investors. With a minimum investment of $250,000, the Fund provides annualized returns at a preferred rate of 13% distributed monthly. The Fund’s capital markets efforts are led by its Head of Capital Markets, Alan Rios, who joins the company from Wall Street.

The pilot shortage has far-reaching effects, not just in the aviation industry, but in other sectors of the economy, such as commerce and hospitality. Airlines must redouble their efforts to increase recruitment and retention of pilots, but there must also be changes in how pilots are trained, creating a more resilient pipeline. This includes investing in training programs as well as resolving emerging financing challenges. Companies such as Stratus Financial are helping address this need by creating innovative ways for aspiring pilots to achieve their dreams.