Once US airlines returned to profitability again, their pilots understandably wanted a bigger cut of the industry’s recovery. The largest airlines in the country have been negotiating new pilot contracts for months, with unions rejecting potential agreements on several occasions. Airlines faced the dual challenge of combating a shortage of pilots while attempting to keep a lid on costs. At the same time, pilot unions were demanding higher pay and better schedules on the heels of what’s been termed a roller coaster two years amidst the COVID pandemic, which resulted in record airline losses of approximately $35 billion in 2020. The pandemic also derailed contract talks with pilots, setting the stage recently for widespread negotiations. Delta Air Lines pilots picketed at major airports in the spring and summer of 2022. Last October, 99 per cent of its union members approved to authorize a strike, if it came to that.
But, it never did as Delta's pilots agreed to a new contract early last month, giving them a hefty 34 per cent pay increase over three years. Roughly 78 per cent of Delta’s 15,000 pilots, represented by the Air Line Pilots Association (ALPA), voted to ratify the new contract, which includes over $7 billion in cumulative increases through December 2026. The details are astounding. Delta’s pilots get an immediate raise of at least 18%, with another 5% after one year, 4% after two years and 4% after three years. Pilots will then receive two 4 per cent pay increases in the two years that follow, as well as a one-time payment of 4 per cent of 2020 and 2021 salary, plus a 14 per cent payment of 2022 salary. There’s even a provision to bump pay further if pilot salaries at American Airlines and United Airlines surpass Delta’s. The contract also includes increased 401K matches, lower healthcare premiums and increased vacation time.
Tensions at the airline had risen as the Atlanta-based carrier’s pilots had been working without a contract for three
years. This agreement reflects the leverage pilots enjoy during an industry-wide pilot shortage and has already impacted negotiations at another carrier. A statement from Delta noted that ground, scale and merit employees also saw pay raises starting this month. “I want to thank both negotiating teams and the National Mediation Board for their efforts in reaching this agreement that recognizes our pilots’ contributions to Delta,” said John Laughter, Executive Vice President and Chief of Operations “From the beginning of the negotiations process, we set out to deliver the industry’s best pilot contract to the industry’s best pilots, one that keeps us as a top destination for US aviation careers, and this contract is a reflection of that unwavering commitment.”
Meanwhile, American Airlines had said it wanted its pilots to be the best paid in the industry. And so not to be outdone, CEO Robert Isom announced in the second week of last month that he was ready to give his pilots raises and higher retirement contributions that would average 40 per cent over four years to match the recent contract approved by Delta’s pilots. “Let me be clear, American is prepared to match Delta’s pay rates and provide American’s pilots with the same profit-sharing formula as Delta’s pilots,” Isom said in a video message to his pilots. By the end of the agreement, he said in the video, a top-scale captain on an aircraft like a Boeing 737 would make $475,000 a year in salary and retirement plan contributions, while a senior captain on a larger plane such as a Boeing 777 would earn $590,000 a year in comparable pay and benefits. The CEO also vowed better scheduling and “more certainty” on when pilots would fly. Pilots across the industry have complained about frequent schedule changes during airlines’ rocky push to rebuilding networks to meet higher travel demand.
American pilots are still in negotiations for a new contract, but say they expect to do better than Delta’s. “Who walks into negotiations saying “I just want to be like the next guy?” Asked Dennis Tajer, spokesman for the Allied Pilots Association (APA), which represents 15,000 American Airlines pilots. Their contract talks appeared to be on the fast track. But, the president of the union said he will vote in favor of a strike when the ballot for a potential walkout opens today, April 1. Captain Ed Schier, President of the Allied Pilots Association, confirmed on Thursday that the union would proceed with a strike authorization vote following a resolution from its board of directors earlier last month. “As APA President, I will cast my vote in favor of a strike - if it ultimately proves necessary - as an affirmation of my resolve,” Sicher said last week. The ballot will be open for the entire month of April and the results could be made public as early as April 30. If pilots do vote in favor of a strike, the union would have to clear several more legal hurdles before any walkout is possible.
The pressure is certainly on for both United Airlines and Southwest Airlines. On March 15 though, United updated its quarterly guidance to reflect a projection of loss in the first quarter and offered this explanation in a regulatory filing: “The Company has determined that is is appropriate to accrue expense in the firsquarter 2023 related to a potential new collective bargaining agreement with employees represented by the Air Line Pilots Association.” It would appear that United is most likely factoring in new pilot contracts into their earnings forecast. However, their pilots are warning that contract negotiations are heading in the wrong direction. “We are not close,” Garth Thompson, chair of the United chapter of the Air Line Pilots Association, wrote in a recent letter to pilots. “Executive comments imply that our proposal and your union representation are overreaching and unreasonable,” he wrote. Thompson said the new United contract should be “ahead of Delta.” Stay tuned.
Southwest Airlines pilots are set to hold a vote to authorize a strike this spring. The polls will open to union members on May 1 and be counted at the end of that month. “I think it best to consider what our customers have been through over the past several years and the past several weeks. It was the lack of discussion or commitment by our leadership team to rectify those issues for our passengers and our pilots that drove us to make the decision to carry forward on this path,” Southwest Airlines Pilot Association President Casey Murray said in a statement. He was referring to the carrier’s costly holiday meltdown, which highlighted just how quickly airline operations can go off the rails, as evidenced by thousands of cancelled flights, countless separated bags and millions of angry passengers. There can be no doubt that Southwest’s once-touted labor relations are frayed with their pilots at present.
The unintended consequence of the new Delta contract spurred American’s offer and is likely to ignite the negotiating afterburners at United and Southwest. Ticket prices are already at near all-time highs and are likely to get even worse, because for travelers, increased labor costs will eventually mean increased airfares. “Higher input costs, whether driven by fuel or new labor contracts, will inevitably be put to consumers in the form of higher fares,” wrote Jamie Baker, J.P. Morgan analyst in a recent note to investors. He’s right.
Until next time…safe travels.
Wow - interesting reading. You better polish off your pilots license George - the big money is calling!