UPS pilots agree concessions

UPS, stung by tumbling demand for air package shipments, said its pilots union agreed to $131m in concessions during the next three years to avoid layoffs, report Bloomberg.

UPS, stung by tumbling demand for air package shipments, said its pilots union agreed to $131m in concessions during the next three years to avoid layoffs of as many as 300 of the group’s members, report Bloomberg.

The Independent Pilots Association, which represents aviators at world’s largest package-delivery company, agreed to short- and long-term leaves of absence, job sharing, reductions in flight pay guarantees and early retirement to lower costs, UPS and the union said in a joint statement.

The recession has eroded demand for air shipments that provide the Atlanta-based company’s highest revenue per piece, causing volumes for next-day packages by plane to tumble for five straight quarters. UPS’s first-quarter profit declined 56%, and in May it forecast earnings for this quarter that fell short of analysts’ expectations.

“Reduced guarantees were one of the most popular things, and a lot of pilots are telling me they’re doing this because it stops a furlough,” said Bob Miller, president of their union and a UPS captain.

Pilots will need to give up an average of 65 hours of pay during the course of a year to meet the cost-reduction goal, Miller said. Other savings will come through early retirements and giving back the value of accrued sick time, he said.

UPS said in May that it needed to cut pilot expenses by $40m this year to avert furloughs of 10% of the 3,000 pilots represented by the union. The two sides agreed on no layoffs until at least April 2010, while they work to find more savings.

“We applaud our pilots for making the voluntary commitments necessary to help us protect our business and UPS jobs in this uncertain global economy,” Bob Lekites, president of UPS Airlines, said in the statement.

UPS pilots are among the best paid at major US carriers, according to Kit Darby, a consultant in Atlanta who tracks pilot pay. Pilots with 15 years of seniority at UPS are paid about $19,500 a month, while pilots with similar experience at Delta Air Lines Inc. make $11,800 a month, according to Darby.

UPS said in late May that it needed to lower pilot costs by $40m this year, $38m next year and $53m in 2011. The company’s decision last quarter to accelerate retirement of its last 24 DC-8 freighters contributed to the need for fewer pilots, along with the drop in air shipments.

UPS hasn’t asked for similar cost-cutting efforts from other employees such as its drivers, who are represented by the Teamsters union. The company in the past year has reduced expenses by more than $1bn, frozen management salaries and suspended contributions to 401(k) retirement savings accounts.