Delta Airlines pilots make their option to Terminal 4 to picket for a recent contract at JFK International Airport on September 01, 2022 in Latest York City.
Michael M. Santiago | Getty Images
U.S. airlines are profitable again, and their pilots want a much bigger cut of the industry’s recovery.
The largest airlines within the country are negotiating recent pilot contracts, and talks with unions to this point have not gone well. This week alone, unions representing about 30,000 pilots combined at American Airlines and United Airlines rejected potential contracts.
The tensions come because the industry rebounds from the Covid-19 pandemic, which devastated travel demand and drove airlines to record losses of around $35 billion in 2020. The pandemic also derailed contract talks with pilots, flight attendants and other groups, setting the stage for widespread negotiations throughout the industry this yr.
Airlines are facing the twin challenge of combatting a shortage of pilots while keeping a lid on costs. Meanwhile pilot unions are demanding higher pay and higher schedules, on the heels of a roller coaster two years.
Either side are staring down the risks of persistently high inflation.
“We have been crushed by inflation. The cash is coming, there is no query about it,” said Dennis Tajer, an American Airlines Boeing 737 captain and spokesman for the Allied Pilots Association, which represents some 15,000 pilots on the carrier. “What this is actually about is the work-life balance and restoring reliability of airlines — and doing that not on the backs of pilots.”
Latest labor deals are sure to drive up costs at airlines, analysts say. Worker compensation rivals fuel as carriers’ biggest expense. But pilots are in brief supply and aviators at smaller carriers have received huge pay increases in response, so securing deals is in the foremost airlines’ interest as they fight over aviators.
Pilot pay varies widely based on experience and form of aircraft but senior wide-body captains at major airlines could make greater than $300,000.
“I actually have a sense straight away that that is nearly as good because it gets from a bargaining position” for pilots, said Raymond James airline analyst Savanthi Syth.
Deal attempts fall flat
The Allied Pilots Association said on Wednesday that its board of directors rejected a tentative agreement from American Airlines. The Fort Value, Texas-based carrier offered pilot raises of some 19% in the newest two-year contract proposal. American had offered 17% raises earlier this yr.
Beyond pay, APA’s Tajer said the union wants higher work rules, similar to the power to drop and add trips more easily. Major airline unions have said frequent schedule changes and long trips have hurt members’ quality of life.
Earlier this week, United Airlines pilots overwhelmingly rejected a deal for nearly 15% increases over about 18 months. United said it’s already working with its pilots’ union, the Air Line Pilots Association “on a recent, industry-leading agreement that we expect to incorporate improved pay rates and other enhancements.”
Delta Air Lines pilots also this week voted to authorize a possible strike if the union cannot reach a take care of the airline, a lengthy process. Delta noted the vote won’t affect its operation.
The Atlanta-based carrier has said that despite the vote, the 2 sides have “made significant progress in our negotiations and have only a couple of contract sections left to resolve.”
Delta, Southwest Airlines and FedEx pilot unions have turned to federal mediation to resolve impasses.
Flight attendants, too, are negotiating for higher pay and higher work schedules at American, Southwest and United. Off-duty pilots and flight attendants have picketed at airports and company headquarters to demand contract improvements, and more demonstrations are said to be within the works.
Airlines at the moment are attempting to navigate sealing up deals without spooking investors about company funds.
“We negotiate with a mind to making sure that we take care of our team and that we take care of the company as well,” American Airlines CEO Robert Isom said on a quarterly earnings call late last month. “And it’s the best interests of our pilots and flight attendants and everybody on this company. So there’s win-win deals that can be had on the market.”
Double-digit pay bumps
Alaska Airlines pilots ratified a recent contract last month, a rare success story this yr. Under the agreement, some pilots are getting greater than 20% raises at contract signing.
And pilots have been being attentive to massive pay bumps at regional airlines, including some owned by American, smaller carriers where staffing shortages are most acute.
JPMorgan airline analyst Jamie Baker wrote in an Oct. 27 note that “we have long assumed that industry-wide wage increases could be kept comfortably below the double-digit level. That not appears the case.”
The longer negotiations take, he said, the larger the date-of-signing increases might be.
If unions reject deals in an effort to push for higher terms, the industry could face an economic downturn. FedEx CEO Raj Subramaniam in September rattled investors when he predicted a “worldwide recession” is coming.
Meanwhile, passenger airline executives have been much more upbeat about continued travel demand, but increasing costs of living could further embolden unions to ask for a greater deal.
“They ask for the celebrities and so they hope to get the moon,” Syth said of unions.