MEMPHIS, Tenn. — The chair of the pilots’ union at Air Transport International, the biggest air carrier in Amazon’s delivery network, accused ATI management in an interview of dragging its feet on a brand new contract for a whole bunch of pilots until the prevailing transportation services agreement with the mega-retailer will be renewed in two years.
Amazon’s growing e-commerce business and the way pilots are compensated at other airlines that provide outsourced airlift throughout the retailer’s rapid achievement network – not the soft marketplace for general air cargo – must be the barometer for an improved labor contract, added Mike Sterling, chair of the ATI Master Executive Council and a Boeing 767 captain, in an interview.
ATI pilots, represented by the Air Line Pilots Association (ALPA), last week asked the National Mediation Board to declare an impasse in contract negotiations and move the method to binding arbitration. The request is designed to clear the best way for a possible strike against the corporate in a heavily regulated bargaining process. Talks, which have been underway for greater than three and a half years, have broken down over pay, retirement advantages and work rules.
The subsidiary of Air Transport Services Group (NASDAQ: ATSG) operates greater than 40 Boeing 767 converted freighters, in line with database Planespotters.net. About 90% of the airline’s work consists of shuttling e-commerce packages to and from airports near Amazon warehouses across the nation for express delivery to customers’ doorsteps. It also flies 4 Boeing 757-200 combi aircraft, which might carry as much as 42 people and 10 pallets of cargo, and one freighter for the U.S. Department of Defense.
“Based on our experience in negotiations, it seems that ATSG is actively delaying our agreement in an try to synchronize with a brand new air transport services agreement. We discover this delay completely unacceptable as our current contract was amendable in March 2021. To impose a synthetic deadline for negotiations is making a toxic environment of pilot attrition and attraction-related problems,” Sterling told FreightWaves on Wednesday.
Management said during an earnings presentation last summer it didn’t expect to succeed in a labor agreement in 2023.
“In our proffer for arbitration with the National Mediation Board we emphasized executive comments made by ATSG, which clearly point to a delay posture and an impasse between the parties,” Sterling said. “Our pilots’ dedication, professionalism and commitment to deliver a improbable product to Amazon is being eroded by the continuing refusal by ATSG to succeed in an agreement.”
The interview took place here during a symposium organized by ALPA to debate issues unique to pilots who fly freighter aircraft.
When passenger airlines face higher labor costs they’ll raise ticket prices and recoup the rise. ATSG lacks the identical leverage with Amazon, which owns 20% of the corporate and has a fame for using its market clout to get favorable pricing from suppliers.
ATSG negotiates terms of service with Amazon and determines the fee relationship with ATI, primarily hourly flight rates and aircraft lease rates. ATI rents most of its fleet from ATSG’s aircraft-leasing subsidiary and in addition subleases planes provided by Amazon.
“ATSG is the underlying force to succeed in an agreement. Pilot costs eventually are passed through in our block hour rates to our customers,” said Sterling. “ATSG has a responsibility to barter a market-based agreement, despite the fact that we work for ATI.”
The union branch chief dismissed suggestions that the timing for a big pay raise is bad due to the cyclical downturn in heavy airfreight, which is dominated by large business-to-business shipments, for the reason that pandemic. Sterling said Amazon’s air network is geared toward the robust e-commerce sector and express delivery of lightweight packages to consumers, noting that Amazon posted solid leads to 2023.
A powerful holiday shopping season helped increase Amazon’s fourth-quarter North American retail sales by 13% 12 months over 12 months to $105.5 billion. The corporate said customers bought a record 1 billion items on its marketplace through the holiday season. Full-year sales for North America grew 13% to $353 billion. The web retailer last week said Prime deliveries in 2023 were faster than ever. Greater than 4 billion units were delivered by same-day or next-day service, a 65% increase from the prior 12 months.
Sterling said ATI experienced a ramp-up in flight operations for Amazon in mid-November for the height shipping season, because it normally does every year.
Doug Herrington, CEO of worldwide Amazon stores, in a blog post attributed Amazon’s delivery speed to the implementation of a regional moderately than national achievement model, which shortened delivery distances, improved inventory placement and expanded the variety of same-day delivery stations.
Transporting orders from in-region warehouses to local service centers minimizes the stops per package and reduces the necessity for air transportation. But customer deliveries over longer distances depend upon Amazon Air. The web superstore has slowed the expansion of its 8-year-old air network because it matures and e-commerce demand normalizes following the COVID boom, however it has not cut flights or parked aircraft as have many all-cargo carriers, including FedEx and UPS.
In line with Insider Intelligence, U.S. e-commerce sales were projected to succeed in $1.1 trillion in 2023, with 16.4% of all retail sales conducted online. The compound annual growth rate for retail e-commerce within the U.S. through 2027 is 11.4%, in line with Statista.
“The thing that disappoints me probably the most is that Amazon is caught in among the undertow of our discussions with ATSG,” Sterling said, adding that pilots delivered record reliability through the holiday shipping season and annually help generate greater than $500 million in revenue for the holding company.
Closing the pay gap
In November, union members authorized leaders of the Air Line Pilots Association to call a strike over stalled labor talks once such motion becomes permissible under federal law.
The union says pilots are underpaid and overworked due to unfavorable crew scheduling, which resulted in 250 pilots leaving the airline last 12 months. ATI has about 605 pilots, but maintaining that level has come at a high cost in recruiting and training.
“We’ve lost 18 of our pilots already this month. We’ve hired 15. So we’re at net minus three” for January, Sterling said.
ATSG contends it might’t afford top-scale compensation because margins within the all-cargo sector are much lower than for passenger airlines and express delivery operators. The vertically integrated aviation firm has suffered from the sharp downturn in shipping demand that gripped the freighter industry for nearly 18 months, as airline customers in the reduction of on flight requirements and others postponed taking recent aircraft leases. Pilots profit, the corporate adds, by with the ability to reach captain level — and the upper pay rate that comes with it — much faster at Air Transport International than at a significant carrier.
Through three quarters of 2023, ATSG recorded adjusted earnings before accounting measures of nearly $432 million. The complete-year adjusted profit was $631 million in 2022. No date for releasing fourth-quarter results has been announced.
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A Boeing 767-300 captain at ATI with 12 years of experience earns $281.87 per hour in comparison with $297.65 at Atlas Air, one other Amazon partner. At Delta Air Lines and FedEx Express, 12-year 767 captains respectively make $349.50 and $326.51 per hour, in line with ALPA data. A brand new labor deal last 12 months at Amerijet, a midtier cargo airline based in Miami, significantly boosted hourly pay for pilots in the identical category to $301.84.
First-year ATI pilots earn about $68,000 per 12 months, in comparison with $88,000 at FedEx and $107,000 at Delta, which agreed to a brand new pilot contract in 2023.
Sterling said ATI pilots desire a contract just like one their counterparts at Hawaiian Airlines received last 12 months. Hawaiian is a brand new entrant to the all-cargo sector after agreeing in late 2022 to operate 10 Airbus A330-330 widebody freighters for Amazon. It began operating a single cargo jet in October and Amazon is scheduled to supply eight more used aircraft this 12 months once they’ve undergone a passenger-to-cargo conversion.
The four-year pilot contract at Hawaiian Airlines hikes pay nearly 33% on average, raises company retirement contributions and increases schedule flexibility, putting compensation throughout the ballpark of that at carriers similar to FedEx, UPS and Delta.
Hawaiian likely wouldn’t have agreed to the brand new pay-and-benefits package if Amazon wasn’t comfortable with how that might impact the worth of its service, Sterling said.
“They’re [Hawaiian executives] not going to barter a pilot contract that puts them substantially in the outlet,” the union chief said. “The passenger operation is just not ready to subsidize cargo, so that they’re this as a profit center.”
Amerijet, Sterling added, also serves as an excellent benchmark for a contract. “Our proposals are significantly under FedEx and UPS. We just need to get halfway there.”
Management considers the union’s proposal as above the market basis.
“At the tip of the day, you’ve got to have a contract that works for either side. So should you’ve got the union side asking for FedEx or UPS wages or industry-leading, and that’s not within the cards from what we get from our customers, then that’s just not something we will comply with. So the secret’s finding a comfortable middle ground between their demands and our needs to maintain things on the rails,” CEO Joe Hete said during an earnings call on Nov. 7.
Fight for vacation, less demanding schedules
One substantial sticking point involves vacation usage. Under current rules, aviators aren’t paid if approved vacation time falls on an off-duty day. Before the beginning of the 12 months, pilots reserve two to 4 weeks of vacation, depending on seniority, which they’ll split in half. Pilots bid for flight hours in two-month increments. They might get a schedule that calls for working every other week, which suggests they may get one week of paid vacation and no money for the second week that was designated for normal rest.
“We see our pilot group lose 34% of their vacation to days off. It secures a day without work, however it doesn’t include pay as a profit,” Sterling said.
A heavy workload can also be diminishing quality of life, in line with the union.
“ATI began using some more advanced crew optimization software just a few years back and has packed our schedules tighter than ever. One among the explanations is that we don’t have enough pilots to have schedules which are slightly bit more flexed out” while also guaranteeing minimum flight hours and complying with federal duty limitations, Sterling explained.
“You’ll constantly move yourself across the clock [with] day-night transitions. So that you’re flying daytime sooner or later and the following night you’re going out at 1 or 2 within the morning. And the following day you’re doing daytime flying again. The pilots at carriers like FedEx are inclined to be a part of the daytime [package sortation] or a part of the nighttime sort. They don’t are inclined to roll from one to the following.
“We’ve got contract language that claims they’ll minimize this to the extent practicable. Obviously, it’s not strong enough because they’re not minimizing it. And so, you will have to start out with the primary a part of the issue, which is staffing levels. Our staffing levels were reduced, partly for economics, to get the pilots on the property to do greater than they’d been previously. And then you definately take care of rampant attrition and a tough time attracting pilots. It type of traps you in that loop. And it’s tough flying.”
Sterling estimated it could take a pilot cohort that was 10% larger to supply more consistent scheduling.
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With such a decent labor pool, ATI is hiring inexperienced pilots who will be awarded captain slots during initial training if there may be a gap and so they are on the seniority list, he told FreightWaves.
“After which, the general flight time experience has gone to absolute minimum levels. We’re seeing single-engine, fixed-gear pilots coming to work and transitioning to a 767,” Sterling said. “That’s an enormous leap.”
A pilot graduating from a single-engine turboprop, like a Cessna, would normally first progress to a small regional jet.
“To go from a single-engine aircraft with no gear handle to a 767 [with retractable landing gear], and the sophistication of that operation is asking a whole lot of that pilot,” Sterling said. “They might have never been above 10,000 feet of their profession. And the speed of operations is just dramatically higher.
“Our training failure rate has risen dramatically. They either wash out or need quite a bit more training. And our training review boards are up 400% over the past two years.”
The committees, that are standard at every airline, meet as needed to debate the progression of pilots who’re experiencing difficulty completing training and recommend any remedial training which may be mandatory.
“Meaning the people we’re hiring aren’t moving through the training pipeline like we’d have seen up to now,” the pilot leader said. “At ATI, should you do two training review boards in your process, they’re probably going to discontinue your employment. Just last week, probably five pilots went out the door that didn’t complete training from being hired in the autumn. So, it’s very expensive. But if you’re hiring pilots that don’t have a proven background, then that’s going to be the result.
“Aviation looks like baseball to me,” Sterling continued. “You begin playing single A ball and work your way as much as double A and each from time to time a man jumps right from highschool to the majors. That person is basically talented. It’s the identical thing in aviation. I went through the stepping stones. That’s the traditional progression. They usually’re just skipping all of the intermediate clubs, you already know, going right to the massive show.”
In an announcement provided to FreightWaves, ATSG said it “looks forward to ATI and its pilots’ union reaching an agreement that enables ATI to deliver service while being competitive out there. ATI continues to draw and hire candidates that exceed the standards set forth by federal regulations. The protection and reliability of ATI has remained consistent during greater than 40 years of airline operations.”
Fewer tools to pressure airlines
Attending to the purpose where employees can exercise their right to strike stays an uphill climb.
Collective bargaining for airlines is governed under the Railway Labor Act, which is far more restrictive than general labor law.
Under federal rules designed to stop work interruptions in critical interstate commerce, employees are prohibited from striking and firms from locking out employees until a lengthy series of bargaining steps, including federal mediation, are accomplished. The federal mediator has the ability to carry the parties in mediation indefinitely. ATI and the pilots’ union have been working with a mediator, who reports to the board, since late March.
Before a strike can happen, the National Mediation Board must first determine that additional mediation efforts wouldn’t be productive and offer the parties a possibility to arbitrate the dispute before a special panel. If either side declines the arbitration, each parties enter a 30-day “cooling off” period, after which the parties can engage in self-help — a strike by the union or a lockout by management.
Arbitration within the airline industry is rare because either side must comply with it. And, the NMB historically has been very reluctant to open the door to potential strikes, which airlines often use to their advantage in negotiations.
There may be yet one more catch: The law allows the president to create an emergency board to research a labor dispute and issue a report inside 30 days if the parties reject binding arbitration. That’s followed by one other 30-day period to think about the board’s recommendations and reach an agreement. If no agreement is reached at the tip of the second cooling-off period, the parties may take motion.
ATSG last week announced the retirement of ATI President James O’Grady, who led the airline subsidiary since 2016 and held a wide range of roles within the corporation over a 40-year profession. His substitute is Chief Operating Officer Mike Betson. Prior to joining ATI in 2021, Betson was vice chairman of commercial engineering for UPS.
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