CSCSNA Market Information

Further Airline Problems are Brewing at UPS – Supply Chain 24/7



Further Airline Problems are Brewing at UPS – Supply Chain 24/7

Further Airline Problems are Brewing at UPS

The first connections in the UPS network were made in the early 20th century, when few automobiles traveled the roads, before the world’s first airline took flight, and decades before…

Further problems are brewing the airline industry following the latest Lufthansa strike.

The latest development on that front is an order by a German court to put an end to the strike, meaning that flights are expected to be back to normal on Thursday after 1000 of them had been affected.

Lufthansa has insisted that it will go ahead with restructuring designed to meet increasing competition.

Now the possibility of a major disruption to UPS domestic and international air cargo services has moved closer after the union representing pilots at the parcel giant asked its members to back a strike.

The Teamsters have also ended talks with the airline and called a strike.

The Independent Pilots Association representing all UPS pilots says that negotiations which began four years ago have gone on too long.

UPS said it wants to reach an agreement as soon a possible, but such contracts often take years to agree because of their complexity.

The company has claimed that the threat of a strike is costing it about $5 million a day in business lost to competitors such as the US Postal Service and Federal Express Corp.

Source: Erik Kozari

UPS Pilots Union Set To Call a Strike Vote
Earlier today, the Independent Pilots Association (IPA), a trade union representing pilots at UPS, said its leadership has called on its 2,528 members to authorize a pilot strike against UPS. It said that if this gets membership approval, the IPA’s five-member executive board would be able to request a release from federally-mediated negotiations with UPS. Results of this vote will be announced on October 23.

“A strike is the least desirable outcome of labor negotiations, but after four years of contract talks with UPS we’ve reached a point where UPS needs to hear loud and clear from our membership that they are willing to do whatever it takes to secure an industry leading contract,” said IPA President, Captain Robert Travis in a statement. “UPS has stalled and delayed, unnecessarily prolonging our negotiations. UPS management has created a bitter standoff with its pilot employees.”

IPA President, Captain Robert Travis

“UPS has stalled and delayed, unnecessarily prolonging our negotiations”Captain Robert Travis, Independent Pilots Association

This comes at a time when UPS’s primary competitor, FedEx, recently inked a tentative pilot labor agreement with its pilot trade union, ALPA (Air Line Pilot Association). The FedEx contract ratification vote will be presented to more than 4,000 FedEx pilots, with voting set to begin on September 28 and close on October 20. IPA’s Travis said that if ratified, the FedEx pilot deal will bring labor peace to “our main competitor,” whose pilots are only major employee group at FedEx covered by a collective bargaining agreement.

“UPS intends to reach an agreement that rewards our employees and protects our competitive position,” a UPS spokesman told Logistics Management. “During the 27-year history of UPS Airlines, we have successfully negotiated four contracts with our pilots, who are the top earners in commercial aviation. We hope to reach a new agreement as quickly as possible. However, airline industry contracts often take multiple years to complete. This is due to the complexity of the pacts and the protections of the Railway Labor Act (RLA) [the U.S. law that governs airline contract talks]. Under the RLA, airline contracts do not expire, they become amendable. Their terms remain in force while the new contract is negotiated. This is true even when the union employs tactics such as a strike authorization vote, a routine show of solidarity in airline negotiations that is legally irrelevant to the actual proceedings.”

UPS also noted that its captains are currently guaranteed a minimum of annual salary of $255,128, with a typical captain earning another $35,000, adding that by comparison the FedEx captains earn a guaranteed $230,379. The average pay of all UPS pilots, including captains and first officers, is $238,000, dwarfing the median wage for a U.S. commercial airline pilot at $98,410 based on the Bureau of Labor Statistics data.

On the pensions side, UPS said its crew members enjoy two company-funded retirement plans in addition to a traditional 401(k): a defined benefit plan (traditional pension), and a defined contribution plan. They are also covered by a comprehensive health insurance plan with an annual contribution that costs a third less than what a typical U.S. family, with far lower income, pays, said UPS.

Jerry Hempstead, president of parcel consultancy Hempstead Consulting

“The efficacy of UPS and FedEx are now so critical to the U.S. economy I just can’t envision the government allowing the pilots to strike”Jerry Hempstead, President, Hempstead Consulting

Jerry Hempstead, president of parcel consultancy Hempstead Consulting, said that one needs to know that the UPS pilots cannot simply walk out and strike, calling it saber rattling.

“The pilots are currently under mandated negotiations,” he said. “The vote is that the leadership of the Union can ask the appointed negotiator if they can get out of the mandate. There are several dynamics here. One is that the Fedex pilots have come to an agreement with management. So shippers can get through the holiday shipping period with the peace of mind that the FedEx pilots will be on the job. Conversely the UPS pilots now have sewn FUD (Fear, Uncertainty, & Doubt) into the minds of UPS customers.”

The greater risk, Hempstead said, would be if UPS Pilots “work to the rule” and call in sick, among other actions, to slow down UPS during the peak shipping season, adding that IPA is doing what is expected to put pressure on management to make more concessions, which, in turn, mean higher shipping rates for shippers).

“Management at UPS is very disciplined and I’m sure the issues separating the parties will get resolved without a service interruption,” he said. “The efficacy of UPS and FedEx are now so critical to the U.S. economy I just can’t envision the government allowing the pilots to strike.”

Source: Jeff Berman

Source: Jeff Berman & Eric Kozari

Suppy Chain 24/7