Delta Airlines pilots head to Terminal 4 to picket a new contract at JFK International Airport on September 1, 2022 in New York City.
Michael M. Santiago | Getty Images
American airlines are profitable again, and their pilots want a bigger slice of the industry recovery.
The country’s biggest airlines are negotiating new pilot contracts and talks with unions have not gone well so far. This week alone, unions representing approximately 30,000 pilots combined with American airlines and United Airlines potential contracts rejected.
The tensions come as the industry rebounds from the Covid-19 pandemic, which devastated travel demand and led airlines to post losses of around $35 billion in 2020. The pandemic has also derailed contract talks with pilots, flight attendants and other groups, setting the stage for extensive negotiations across the industry this year.
Airlines are faced with the double challenge of fighting a pilot shortage while controlling costs. Meanwhile, pilots’ unions are demanding higher wages and better hours in the wake of a Russian mountains two years.
Both parties are looking at the risks of persistently high inflation.
“We’ve been crushed by inflation. The money is coming, there’s no doubt about it,” said Dennis Tajer, captain of an American Airlines Boeing 737 and spokesman for the Allied Pilots Association, which represents some 15,000 pilots with the carrier. “What it’s really about is work-life balance and restoring airline reliability – and not doing it on the backs of pilots.”
The new working arrangements are sure to drive up airline costs, analysts say. Employee compensation rivals fuel as carriers’ top expense. But the pilots are rare and the airmen of the small carriers received huge pay raises in response, it is therefore in the interest of the major airlines to strike deals as they compete for airmen.
Pilot pay varies widely based on experience and aircraft type, but senior captains of large jets on major airlines can earn upwards of $300,000.
“I feel right now it’s as good as a negotiating position” for the pilots, said Raymond James airline analyst Savanthi Syth.
Attempts to agree fail
The Allied Pilots Association said Wednesday its board of directors had rejected a tentative deal from American Airlines. The Fort Worth, Texas-based carrier offered pilot raises of about 19% in the latest two-year contract proposal. American had offered 17% raises earlier this year.
Beyond pay, APA’s Tajer said the union wants better work rules, such as being able to remove and add rides more easily. Major airline unions said frequent schedule changes and long journeys were hurting members’ quality of life.
Earlier this week, United Airlines pilots overwhelmingly rejected a deal for increases of almost 15% over about 18 months. United said it was already working with its pilots’ union, the Air Line Pilots Association “on a new industry-leading agreement which is expected to include improved pay rates and other improvements”.
Delta Airlines the pilots also voted this week to authorize a possible strike if the union does not reach an agreement with the airline, a long process. Delta noted that the vote will not affect its operation.
The Atlanta-based carrier said that despite the vote, both parties have “made significant progress in our negotiations and only have a few sections of the contract left to resolve.”
Delta, South West Airlines and fedex the pilots’ unions have turned to federal mediation to resolve the impasses.
Flight attendants are also negotiating higher wages and better work hours at American, Southwest and United. Pilots and flight attendants on leave have picketed airports and company headquarters to demand contract improvements, and more protests are reportedly underway.
Airlines are now trying to make deals without scaring off investors about the company’s finances.
“We trade making sure that we take care of our team and also take care of the business,” American Airlines CEO Robert Isom said on a quarterly earnings call at the end of of last month. “And that’s in the best interests of our pilots and flight attendants and everyone in this business. So there are win-win deals that will be made there.”
Double-digit salary increases
Alaska Airlines pilots ratified a new contract last month, a rare achievement this year. Under the agreement, some pilots get increases of more than 20% upon signing the contract.
And pilots have taken note of massive pay increases at regional airlines, including some owned by smaller US carriers where staffing shortages are most acute.
JPMorgan airline analyst Jamie Baker wrote in an Oct. 27 note that “we have long assumed industry-wide wage increases would be kept comfortably below the double-digit level. That doesn’t seem to be the case anymore.”
The longer the negotiations last, he said, the bigger the increases in the signing date could be.
If unions reject the deals in a bid to push for better terms, the industry could face an economic downturn. FedEx CEO Raj Subramaniam in September shocked investors when he predicted a “global recession” is approaching.
Meanwhile, passenger airline executives have been much more optimistic that travel demand will continue, but the rising cost of living could still embolden unions to demand a better deal.
“They ask for the stars and they hope to get the moon,” Syth said of the unions.