A tentative labor agreement last week could make Hawaiian Airlines’ pilots the highest paid in the cargo industry, exceeding compensation levels at traditional standard-bearers FedEx Express and UPS, as the Honolulu-based carrier prepares to begin flying heavy freighters for Amazon later this year.
Amazon’s private airline will incur higher expenses, but locking in a lucrative, long-term contract ensures Hawaiian Airlines (NASDAQ: HA) labor stability and enables it to attract crew members during a period of pilot scarcity — features Amazon (NASDAQ: AMZN) will likely find attractive for reliable deliveries.
The Air Line Pilots Association announced Thursday that negotiators had reached agreement with Hawaiian Airlines on a four-year contract that significantly boosts pilot pay, including for the carrier’s new cargo operation. The increase makes pay scales at Hawaiian very competitive with the top all-cargo carriers as well as passenger majors such as Delta Air Lines and United Airlines, according to union data.
The new terms of employment include an average 32.9% pay increase over the duration of the deal for Hawaiian’s three aircraft types (plus future freighters and Boeing 787s), led by an average 16.6% increase at the time of signing. The deal includes a signing bonus, raises company retirement contributions, creates a health reimbursement account, increases schedule flexibility and addresses quality of life.
Hawaiian Airlines’ 1,000 pilots will vote on the new deal over two weeks, beginning Friday. If ratified, the contract will take effect on March 2.
A significant feature of the proposed agreement is the industry-leading pilot pay for Hawaiian’s future fleet of Airbus A330 freighters.
In October, Amazon Air said it will lease 10 used A330s converted to cargo configuration and place them with Hawaiian to operate on its behalf in the continental United States, and to Hawaii, for at least eight years. The A330 will be the largest aircraft in Amazon’s fleet, which has grown in six years to 110 aircraft crewed and maintained by several contract carriers. The cargo jets will replace older Boeing 767 freighters as their contracts with suppliers expire.
Amazon will pay a fixed monthly fee per aircraft, a per-flight-hour fee and a fee for each flight cycle operated. It will also reimburse Hawaiian for operating expenses, including fuel, certain maintenance and insurance premiums. Hawaiian said it intends to establish a pilot base on the continental U.S., grow existing maintenance bases and expand the hiring of pilots and other personnel to support the new cargo operation.
Hawaiian expects to begin operating the first two A330 converted freighters in the second half of 2023, said spokeswoman Kris Tanahara.
The Amazon business is expected to add about 160 pilots to Hawaiian’s ranks.
Under the tentative agreement, an A330 freighter captain with top seniority at Hawaiian Airlines would earn $376 per hour, with pay rising to $436 per hour in 2027 — well above current and projected pay scales for FedEx (NYSE: FDX) and UPS (NYSE: UPS) pilots — according to ALPA rate-comparison charts viewed by FreightWaves.
Federal Aviation Administration regulations limit pilots to 83 duty hours per month, not including vacation sick leave or overtime premium pay.
UPS pilots last August ratified a two-year contract extension that was limited to pay and pension benefits.
Meanwhile, FedEx pilots are unhappy working under a contract that became eligible for amendment in November 2021, preceded by six months of advance negotiations. In October, ALPA filed for federal mediation with the National Mediation Board to help move the talks forward. The pilots argue they should be rewarded with an industry-leading contract because they sacrificed during the pandemic to keep FedEx moving critical goods and medical equipment, and were instrumental in generating record profits for two years before the freight market weakened in the fall.
FedEx pilots have held a series of informational pickets on Wall Street and at major FedEx air hubs. Last month they placed a full-page advertisement in The Wall Street Journal in an effort to alert customers and shareholders about what they claim is foot-dragging by the company.
It’s possible that a new collective bargaining agreement between FedEx and its pilots could supersede the one at Hawaiian Airlines, although the recent plunge in operating income and a sour demand outlook for 2023 could negatively influence management’s thinking.
Comparisons aren’t always simple because most airlines have different pay grades by aircraft type and size. UPS, for example, is unusual in that it has a blended rate for its aircraft types. And neither express carrier flies the A330.
Amazon didn’t respond to requests for comment.
Pipeline of pilot contracts
A large number of major passenger airlines are also negotiating, or have recently concluded, new labor deals with their cockpit crews. And pilot scarcity and inflation are driving up wages.
Pilots are in a strong negotiating position because airlines haven’t been able to hire and train pilots fast enough to keep up with post-pandemic travel demand after thousands of employees were laid off or retired during the downturn. Meanwhile, low-cost and startup carriers are expanding.
Pilots are eager to reset market rates because most of them didn’t receive raises as airline contracts lapsed during the pandemic and the rising cost of living eroded take-home pay, said Christopher Stathoulopoulos, an airline analyst at Susquehanna Financial Group.
In early December, Delta Air Lines (NYSE: DAL) reached an agreement in principle with pilots on a four-year contract that significantly improves compensation levels. The proposal includes an 18% increase in the first year, followed by a 5% bump in year two and 4% increases in each of the final two years. A “me-too-clause” will automatically raise pay an additional 1% if American Airlines (NASDAQ: AAL) or United Airlines (NASDAQ: UAL) offers wage parity with Delta. The company’s 15,000 pilots will vote on the deal, which now sets the benchmark for U.S. carriers to follow, during February.
Alaska Airlines (NYSE: ALK) pilots ratified a three-year contract in October that delivers wage increases up to 23%, depending on years of service. Top-of-scale captains will make $306 per hour, increasing to $330 after two years, according to the company. Alaska only operates narrowbody aircraft.
Pilots at United Airlines and American Airlines last fall turned down contracts recommended by their unions. The United bargaining unit of the Air Line Pilots Association on Monday elected a new chairman, setting the table for negotiations to resume next month.
Last week, the Southwest Airlines Pilots Association called for a strike authorization vote from members, beginning May 1. The move follows the airline’s disastrous performance during the holidays when outdated scheduling systems were unable to cope with bad weather, leading to thousands of canceled flights. Contract talks have been ongoing for more than three years.
Airlines, on average, have about 16 pilots per aircraft to ensure coverage for weather and other disruptions. When Spirit Airlines added 33 planes last year, it also needed 528 more pilots, according to Bloomberg Intelligence analyst George Ferguson.
“Over the next five years we expect that new-aircraft deliveries for carriers expanding fleets, such as Spirit, Frontier, JetBlue and Breeze will require 6,000 new pilots. These numbers don’t include retirements and growth for cargo carriers. Any relief from initiatives such as single-pilot cockpit operations seem at least a half decade away, leaving the pilot shortage in place unless there is a dramatic downturn in the business,” Ferguson wrote in a recent client note.