Pilots for FedEx Express are frustrated that they don’t have a new collective bargaining agreement in hand after more than a year of talks, while counterparts at UPS and United Airlines are on track for substantial compensation increases in pending contract agreements.
In fact, all of the major U.S. airlines are negotiating new contracts with their pilots. And with a tangible shortage of pilots contributing to flight cancellations and schedule cutbacks, many pilots can choose where they want to go, experts say.
A group of pilots picketed in front of the FedEx Express Air Operations Center in Memphis, Tennessee, on Tuesday to show their dissatisfaction with the pace of negotiations on a new labor deal to improve pay, retirement benefits and quality-of-life issues. The union members, represented by the Air Line Pilots Association (ALPA), say they have put themselves in harm’s way to keep the airline moving critical goods, such as face masks and vaccines, during the pandemic and are a big reason behind FedEx’s extraordinary profits the past couple of years.
ALPA said talks started in May 2021, six months before the contract was eligible to be amended, with a mutual goal of reaching an employment agreement by May of this year.
“Throughout the pandemic, while many were shutting down and working virtually, FedEx pilots were flying across the globe keeping the world economy intact. We have earned an industry-leading contract through these remarkable efforts and now is the time for FedEx to deliver,” said Capt. Chris Norman, chair of the FedEx Master Executive Council, in a news release.
ALPA said the group conducting the demonstration numbered in the hundreds, but the figure could not be independently verified.
FedEx (NYSE: FDX) last Thursday reported a record $93.5 billion in revenue for its May fiscal year, with a 12.5% increase in adjusted net income to $5.5 billion. On Wednesday, FedEx outlined new financial targets for fiscal 2025, including 4% to 6% compound annual revenue growth and 8% to 9% adjusted operating margin for the FedEx Express unit.
The Railway Labor Act, which governs labor relations in the airline industry, limits the ability of airline workers to pressure management until a lengthy series of negotiating procedures have been followed. Informational pickets are designed to raise awareness for customers and other stakeholders and unify union members.
“FedEx remains engaged in productive negotiations with our pilots’ union. These negotiations are a normal part of our business and have no impact on our service, as we continue delivering for our customers around the world. We will continue to negotiate in good faith with our pilots and are committed to reaching an agreement that is fair to our pilots, our other team members and all other stakeholders,” FedEx said in a statement provided to FreightWaves.
The renewed push for a labor settlement follows an agreement between UPS (NYSE: UPS) and the leadership of the Independent Pilots Association that includes unspecified wage increases and enhanced pension benefits. Rank-and-file members have until Aug. 3 to vote on the deal.
United pilots set bar
Meanwhile, union leaders representing 14,000 pilots at United Airlines (NASDAQ: UAL) announced they had approved a tentative agreement to modify terms of their contract. If ratified, the deal will add $1.3 billion of value for United pilots over a two-year period, including a retroactive raise that will boost pay $190 million in 2022, with three pay rate increases totaling more than 14.5%. It also includes enhanced overtime and premium pay, improved trip scheduling to combat pilot fatigue, more schedule flexibility, a new eight-week maternity leave and other benefits.
The two-year duration of the contract is half of what’s customary in the industry.
The deal will set the bar for upcoming pilot negotiations at Alaska Airlines (NASDAQ: ALK), American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL) and Southwest Airlines (NYSE: LUV), as well as for United mechanics and flight attendants, J.P. Morgan equity analyst Jamie Baker said in an investor note.
He estimated that a 12-year captain on average will get an industry-leading $294 per hour for flying a standard Boeing 737, depending on the model. Pilots flying bigger aircraft will earn even more.
Equally significant, United didn’t seek changes to the contract’s scope clause, which limits the number and size of aircraft that can be flown by the airline’s regional affiliates. Scope provisions are intended to preserve union jobs by preventing outsourcing to lower-cost providers.
United and some of its mainline rivals have capped their regional airlines’ jets at 76 seats for the past decade. United subsequently limited CRJ-700 aircraft to 50 seats. As part of a revised agreement in 2020 designed to avoid furloughs and leave United better prepared for the snapback in travel, United agreed to reconfigure 76-seaters to 70 seats. The new deal doesn’t appear to change the number of permitted 76-, 70- or 50-seat regional jets.
There is also no change in the weight of the aircraft allowed. That eliminates the possibility of using more efficient Embraer E-175-E2 jets, which are heavier and are powered by a cleaner-burning Pratt & Whitney engine, according to aviation news site Leeham News & Analysis.
It is now highly unlikely there will be scope changes at Delta and Alaska, where pilots are also represented by ALPA, it said.
Delta pilots last week conducted informational pickets at several U.S. airports and have more demonstrations scheduled on Thursday. The last contract was signed in 2016. It has been 2.5 years since the contract became eligible for changes and 3.5 years since Delta pilots got a pay raise, according to ALPA. Pilots complain the company is overscheduling them to make up for crew shortages, leading to fatigue.
In addition to seeking improvements in pay, retirement, and job protections, the union is also demanding changes to pilot schedules. In recent letters to Delta customers and the Delta board of directors, ALPA pointed out alleged missteps that could have mitigated ongoing flight disruptions.
In June, the Delta Master Executive Council passed a vote of “no confidence” in the management teams of Delta’s Flight Operations, Crew Resources, and Flight Training & Standards departments because of the scheduling issues leading to flight cancellations.
“Demand is back, and pilots are flying record amounts of overtime but we are still seeing management cancelling, leaving our customers stranded and their holiday plans ruined. Unfortunately, this mismanagement continues. And it extends to a complete lack of urgency to resolve our issues at the negotiating table,” said Capt. Jason Ambrosi, chair of the Delta ALPA Master Executive Council, in a statement.
The Delta pilots’ union recently opened a strike center at its Atlanta office to begin preparing pilots for scenarios permitted under the Railway Labor Act. “Our goal is to achieve an industry-leading contract. But if management doesn’t get serious, we’ll go the distance to get the contract we deserve,” said Ambrosi.
Pay, benefits and work rules are also key agenda items for American Airlines’ pilots. Eric Ferguson, the president of the Allied Pilots Association representing American Airlines’ pilots, recently urged management not to wait for United and other carriers to complete contract talks. He also criticized American for giving a temporary 50% pay increase to regional pilots at Envoy Air, Piedmont and PSA to keep regional schedules intact.
“In typical American Airlines management Band-Aid fashion, the big pay increases are in effect only through August 2024. Apparently, management intends to weather the immediate crisis and — once the regional pilot supply has stabilized — they believe they will be able to turn around and roll back pilot pay at the three carriers. You won’t find that on anyone’s short list of best business practices, and it’s easy to predict just how toxic the effect will be on labor-management relations if the pay increases are rescinded down the road,” Ferguson said in a June 14 blog post.
On Monday, Envoy Air began offering pilots triple pay to pick up uncovered trips in July and help avoid flight disruptions.
The rapid and unexpected surge back to profitability makes it possible for United to offer more generous labor terms to its pilots. Baker said strong airline performance coming out of the pandemic trough will pull forward contract renegotiations from 2024 by a year or more.