Hawaiian pilots land lucrative cargo contract ahead of new Amazon service

A tentative labor agreement last week could make Hawaiian Airlines pilots the highest paid in the cargo industry, surpassing the compensation levels of traditional bannermen FedEx Express and UPS, as the Honolulu-based carrier prepares to begin flying heavy freighters for Amazon later this year. .

Amazon’s private airline will incur higher expenses, but securing a lucrative long-term contract ensures Hawaiian Airlines’ (NASDAQ: HA) job stability and allows it to attract crew members during a period of pilot shortages, characteristics that Amazon ( NASDAQ:AMZN) you will probably find it attractive for reliable delivery.

The Air Line Pilots Association announced Thursday that negotiators had reached an agreement with Hawaiian Airlines on a four-year contract that significantly increases pilot pay, including for the airline’s new cargo operation. The increase makes wage scales at Hawaiian very competitive with major cargo airlines as well as major passenger carriers such as Delta Air Lines and United Airlines, according to union data.

The new employment terms include a 32.9% average pay increase over the term of the agreement for Hawaiian’s three aircraft types (plus future freighters and Boeing 787s), led by an average 16.6% increase at the time. of the signature The agreement includes a signing bonus, increases company retirement contributions, creates a health reimbursement account, increases schedule flexibility and addresses quality of life.

Hawaiian Airlines’ 1,000 pilots will vote on the new agreement over two weeks, starting Friday. If ratified, the contract will enter into force on March 2.

An important feature of the proposed deal is industry-leading pilot pay for Hawaiian’s future fleet of Airbus A330 freighters.

In October, Amazon Air said it will lease 10 used A330s converted to cargo configuration and place them in Hawaiian to operate on its behalf in the continental United States and Hawaii for at least eight years. The A330 will be the largest aircraft in Amazon’s fleet, which has grown in six years to 110 aircraft manned and maintained by various contract carriers. The cargo planes will replace older Boeing 767 freighters as their supplier contracts expire.

Amazon will pay a fixed monthly fee per aircraft, a fee per flight hour, and a fee for each flight cycle operated. It will also reimburse Hawaiian for operating expenses, including fuel, certain maintenance premiums and insurance. Hawaiian said it intends to establish a pilot base in the continental US, grow existing maintenance bases and expand the hiring of pilots and other personnel to support the new cargo operation.

Hawaiian expects to start operating the first two converted A330 freighters in the second half of 2023, spokeswoman Kris Tanahara said.

The Amazon business is expected to add about 160 pilots to Hawaiian’s ranks.

Under the tentative agreement, an A330 freighter captain with the highest seniority at Hawaiian Airlines would earn $376 per hour, with wages increasing to $436 per hour by 2027, well above the current and projected wage scales for FedEx (NYSE: FDX) and UPS (NYSE: UPS) pilots, according to ALPA rate comparison charts seen by FreightWaves.

Federal Aviation Administration regulations limit pilots to 83 hours of service per month, not including vacation sick leave or overtime premium pay.

The UPS pilots ratified a two-year contract extension last August that was limited to wages and pension benefits.

A computer-generated image of an Amazon Air A330 with the Hawaiian Airlines certificate of operation. The livery is changed from that of Amazon’s 767 freighters, with the tail and bottom colors transposed. (Image: Hawaiian Airlines)

Meanwhile, FedEx pilots are not happy working with a contract that became eligible for amendment in November 2021, preceded by six months of anticipated negotiations. In October, ALPA requested a federal mediation before the National Mediation Board to help advance the talks. The pilots argue they should be rewarded with an industry-leading contract because they sacrificed during the pandemic to keep FedEx moving critical goods and medical equipment, and were instrumental in generating record profits for two years before the cargo market It will weaken in the fall.

FedEx pilots have staged a series of information pickets on Wall Street and at major FedEx air hubs. Last month, they placed a full-page ad in The Wall Street Journal in an effort to alert customers and shareholders to what they say is a delay by the company.

It is possible that a new collective bargaining agreement between FedEx and its pilots could replace the one for Hawaiian Airlines, although the recent drop in operating income and a sour demand outlook for 2023 could negatively influence management thinking.

Comparisons are not always simple because most airlines have different pay grades based on aircraft type and size. UPS, for example, is unusual in that it has a combined rate for its types of aircraft. And none of the express carriers fly the A330.

Amazon did not respond to requests for comment.

Pilot contract portfolio

A large number of major passenger airlines are also negotiating, or have recently concluded, new labor agreements with their cabin crews. And the pilot shortage and inflation are driving up wages.

Pilots are in a strong bargaining position because airlines have been unable to hire and train pilots fast enough to meet post-pandemic travel demand after thousands of employees were laid off or retired during the recession. Meanwhile, low-cost and startup carriers are expanding.

Pilots are eager to restore market fares because most of them did not receive increases as airline contracts expired during the pandemic and rising cost of living eroded take-home pay, said Christopher Stathoulopoulos, an airline analyst at Susquehanna Financial Group.

In early December, Delta Air Lines (NYSE: DAL) reached an agreement in principle with the pilots on a four-year contract that significantly improves compensation levels. The proposal includes an 18% increase in the first year, followed by a 5% increase in the second year, and a 4% increase in each of the final two years. A “me too” clause will automatically increase salary an additional 1% if American Airlines (NASDAQ: AAL) or United Airlines (NASDAQ: UAL) offer salary parity with Delta. The company’s 15,000 pilots will vote on the agreement, which now sets the benchmark for US airlines, during February.

Alaska Airlines (NYSE: ALK) pilots ratified a three-year contract in October that offers pay increases of up to 23%, based on years of service. Top-tier captains will earn $306 per hour, increasing to $330 after two years, according to the company. Alaska only operates narrow-body aircraft.

United Airlines and American Airlines pilots last fall rejected contracts recommended by their unions. United’s bargaining unit of the Air Line Pilots Association elected a new president on Monday, setting the table for negotiations to resume next month.

Last week, the Southwest Airlines Pilots Association called on members to vote to authorize the strike, effective May 1. The move follows the airline’s disastrous performance during the holidays, when outdated scheduling systems could not cope with bad weather, leading to the cancellation of thousands of flights. Contract negotiations have been ongoing for more than three years.

Airlines, on average, have about 16 pilots per plane to ensure coverage from weather and other disruptions. When Spirit Airlines added 33 planes last year, it also needed 528 more pilots, according to George Ferguson, a Bloomberg Intelligence analyst.

“Over the next five years, we expect new aircraft deliveries for carriers’ expanding fleets such as Spirit, Frontier, JetBlue and Breeze will require 6,000 new pilots. These numbers do not include retirements and the growth of freight carriers. Any relief from initiatives like single-cockpit operations appears to be at least half a decade away, leaving pilot shortages in place unless there is a dramatic downturn in business,” Ferguson wrote in a recent note to the customer.

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