FRESH

Thursday, February 29, 2024
Logistics

ATI pilots seek federal mediation on stalled contract

Pilots at cargo airline Air Transport International, a large transport provider for Amazon Air, and parent company Air Transport Services Group last week asked the National Mediation Board to help broker stalled contract talks. The request comes nearly a month after union leadership representing FedEx pilots empowered itself to request a strike authorization vote from members. 

Richer pilot contracts could limit cargo airlines’ near-term profit margins, but wage increases will be phased in and corporate executives have likely factored that into their revenue projections.

The Air Line Pilots Association and ATSG (NASDAQ: ATSG) have been in negotiation since June 2020. The contract has been eligible to be amended for two years. Once the NMB approves the request, a federal mediator will take control of the bargaining schedule and oversee negotiations. 

The pilots say they are frustrated by ATI management’s alleged refusal to offer them industry-standard terms while the company posts record profits. Sticking points include compensation and retirement benefits. The union said ATI experienced record levels of attrition in 2022, with 126 pilot departures. An additional 32 pilots left ATI in the first two months of 2023.

ATSG last year generated a record $2 billion in revenue and adjusted profits before accounting measures of $641 million, an 18% increase from 2021. Pre-tax earnings for flight services, excluding COVID-related government aid, doubled to $95 million. But the company also noted that a cooling airfreight market will result in an estimated 5% reduction in flight hours this year. 

ATSG is a diversified conglomerate with businesses involved in aircraft leasing, maintenance and repair, pilot training, freighter conversions, and logistics. It also owns a passenger charter airline and all-cargo operator ABX Air. Pilots at ABX Air, represented by the Teamsters union, achieved a new six-year contract in December 2020. The contract took more than six years to complete. Both cargo airlines operate Boeing 767 converted freighters for customers such as Amazon (NASDAQ: AMZN), DHL and UPS (NYSE: UPS).

The Amazon contract spurred ATI’s growth from 81 pilots in 2015 to about 550 pilots. ABX Air has about 240 pilots.

Chief Strategy Officer Michael Berger said during the Feb. 24 earnings call with analysts that the sides are meeting multiple times a month, but no resolution is in near sight. 

“We have always taken the position that we need a pilot contract that pays the pilots well enough that we can retain and attract pilots but also gives us the cost structure required that we compete for business,” Berger said. “And we’ve always been able to make those two positions meet at some point.”

ATSG has not experienced any problem attracting pilots over the past year and has been able to get new recruits trained without any impact to its flight schedules, Berger added.

The union disagrees, claiming ATI is having trouble recruiting and retaining pilots.

“Poor crew planning, poor treatment of pilots, poor working conditions, an outdated contract and an inability to support flight operations due to overworked and underpaid ATI staff across the board have all contributed to a significant number of pilots leaving,” said Capt. Mike Sterling, chair of the union’s ATI unit, in a news release. “ATI pilots’ commitment to delivering superior reliability and service has earned record-breaking profits for ATI and ATSG, yet management is unwilling to invest these profits in the professional pilots who make their success possible. We must secure a contract that reflects the value of ATI pilots.”

One industry watcher, who spoke on condition of anonymity, said ATI’s rapid growth has actually been an excellent retention tool because it provides first officers a chance to become captains and move to a higher pay grade. 

Truist transportation analyst Michael Ciarmoli said in a client note that higher labor costs resulting from any successful contract negotiations with ALPA “will exacerbate inflationary pressures within the company’s ACMI (aircraft, crew, maintenance, insurance) segment.” 

But there is no near-term potential for operational disruption from a labor impasse.

The reality is that pilot contracts often take longer than three years to negotiate. Collective bargaining for airline pilots falls under the Railway Labor Act, which is designed to prevent work interruptions in critical interstate commerce. It precludes workers from striking and companies from conducting lockouts until they go through a lengthy series of bargaining steps, including federal mediation. Atlas Air took six years to execute a new contract with its pilots in 2021.

Industry bargaining

Hawaiian Airlines recently reached agreement with its pilots on a new contract that will also cover its new Airbus A330 freighter service for Amazon, which is scheduled to launch later this year. The contract is considered by pilots and analysts to have set a new bar for the cargo sector above pay scales at FedEx (NYSE: FDX) and UPS. 

UPS pilots last year ratified a two-year contract extension. On the passenger side, pilots at Delta Air Lines and Alaska Airlines in recent months ratified contracts with large raises after allowing the union to authorize a strike when talks dragged on. United, American and Southwest pilots’ unions are still engaged in negotiations.

The FedEx unit of ALPA last month passed a resolution authorizing a strike authorization vote in the future after six months of federally mediated negotiations failed to bring the sides closer. Talks have been underway for  20 months and there is no sign that an actual strike vote is imminent. 

FedEx union officials are now meeting with the full National Mediation Board. If no progress is made, the NMB at some point may release the union to a 30-day cooling-off period during which negotiations can still take place but no strike or lockout can occur. After that, if the parties reject binding arbitration, the law allows the president to create an emergency board to investigate a labor dispute and issue a report within 30 days. That is followed by another 30-day period to consider the board’s recommendations and reach an agreement. If no agreement is reached at the end of the cooling-off period, the parties may take action to advance their interests. 

FedEx and ALPA have resolved retirement and quality-of-life issues but are still at odds over pay levels, said Christopher Norman, chairman of the union’s FedEx Master Executive Council, in an interview.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

RECOMMEND READING:

Amazon contractor ATSG expects cargo jet usage to dip 5% in 2023

The post ATI pilots seek federal mediation on stalled contract appeared first on FreightWaves.

Related Posts

Load More Posts Loading...No More Posts.