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(UPDATED 3:15 p.m. ET with details behind no vote)
Pilots at FedEx Express have rejected a tentative agreement to amend their contract, which would have increased pay by up to 30% over the five-year term, the Air Line Pilots Association announced Monday.
The labor deal was voted down by a margin of 57% to 43%. FedEx (NYSE: FDX) employs nearly 6,000 pilots. FedEx and union negotiators will now have to work on developing a new labor deal.
“Our members have spoken and we will now regroup and prepare for the next steps. In the coming weeks, the FedEx ALPA leadership will meet to establish a timeline for assessing pilot group priorities moving forward. FedEx pilots remain unified and that will drive a new path that will help produce an agreement that all FedEx pilots will be proud to support,” said Capt. Chris Norman, the FedEx ALPA chair.
“The tentative agreement voting results have no impact on our service as we continue delivering for our customers around the world,” FedEx said in a statement. “The parties will return to negotiations under the supervision of the National Mediation Board. While we are disappointed in these voting results, FedEx will continue to bargain in good faith with our pilots to achieve an agreement that is fair for all FedEx stakeholders.”
The vote adds to uncertainty for FedEx at a time of heightened labor activism following the COVID pandemic. Pilots had authorized union leadership to initiate a strike vote before union negotiators reached agreement May 30 on a new deal. The rejection comes as rival UPS braces for a possible strike by 340,000 Teamsters workers that could begin Aug. 1 if the sides don’t reach a resolution this week. UPS pilots have said they will walk off the job in solidarity with UPS truck drivers, parcel carriers and warehouse workers.
Pilots who voted against the FedEx deal have complained about weaker job protections, back pay, alternative pension options and that pay increases were below those achieved by pilots at Delta Air Lines, United Airlines and American Airlines.
FedEx Express has cut $700 million in annual costs from its air network in the past year, part of a larger corporate transformation strategy designed to reduce inefficiency and save $4 billion per year by consolidating its separate express, ground and services businesses under one roof. The decision was triggered by sharply lower shipping demand and investor agitation about lower profit margins. FedEx is also accelerating the retirement of older aircraft and temporarily parking others because of the slowdown in air volumes.
Management has said it plans to make the air network leaner, including by substituting truck service on certain connecting routes to enable consolidation and increase aircraft load factors, and relying more on outsourced air transport, especially for deferred parcels, routes with fluctuating demand and heavyweight freight. The company is also closing some pilot bases and its maintenance facility in Los Angeles.
The tentative labor agreement would have allowed FedEx Express to place more work during surge periods with third-party airlines without paying a higher penalty, but many pilots were concerned that language prohibiting outsourcing if FedEx reduces flight hours or furlough pilots wasn’t strong enough. Under the existing arrangement, FedEx pays a financial penalty to the union that gets distributed to pilots if the company goes above the agreed cap on shipment volume that can be given to charter airlines. Opponents feared FedEx might simply not replace older pilots as they retire and then claim a need to hire partner carriers to meet demand.
Adding to concern was last week’s hiring of former Atlas Air CEO John Dietrich to be FedEx’s chief financial officer, who many accused in online chat rooms of undermining Atlas pilots by acquiring another cargo airline with weaker pilot benefits and shifting more work there until the pilot groups were merged years later. A majority of Atlas Air pilots were unhappy with their amended 2021 contract because terms they didn’t like were forced on them through arbitration.
Many members also thought recovery pay, retroactively owed for the 18 months since the contract was eligible to be changed, was too low and disagreed with the union on how inflation was calculated.
In addition to a 30% pay increase, the pilot contract included a 30% increase to the legacy pension and a company-funded replacement for the legacy pension. ALPA pushed hard for ratification, arguing the deal represented the largest investment in a pilot contract, on a per-capita basis, and that it substantially raised the bar on pilot retirement.
The vote was a rebuke to ALPA’s leadership and the Master Executive Council, made up of officers from the pilot group. Some pilots celebrating the outcome on pilot forums called on union representatives to resign. A common theme among opponents is that the Master Executive Council tried very hard to sell a deal using fear of potential job losses without passage instead of allowing the agreement to sell itself.
“We will NOT vote in concessions. Not after Covid, not after the $Billions executives have squeezed out through stock buybacks, not after our daytime flying passenger brethren at much less profitable carriers are ratifying true industry leading contracts that do not require special math,” said one pilot who goes by the handle CloudSailor.
Other pilot groups have successfully completed new labor agreements.
Pilots at Delta Air Lines agreed in March to a deal that raises pay 34% over four years. A week ago, pilots at United Airlines agreed to a preliminary package that includes pay hikes up to 40.2% over four years. American Airlines last week boosted its offer for a new pilot contract by more than $1 billion to match the United deal on wage scales and other benefits. The original American deal gave pilots a 40% raise over the four-year term.
Pilots at Hawaiian Airlines and all-cargo operator Amerijet also finalized contracts that gave pilots large pay hikes.
Click here for more FreightWaves stories by Eric Kulisch.
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