Airline has hundreds of excess pilots as freight volumes contract
Eric Kulisch·Sunday, November 05, 2023
FedEx Express is encouraging pilots at its cargo airline to take jobs at a regional passenger carrier because there isn’t enough shipping demand to fill everyone’s flying schedules. It’s the latest step over the past 12 months to align FedEx’s air network with a sharp decline in package volumes and improve efficiency as the parcel sector settles to a lower post-pandemic baseline that could last years.
Pat DiMento, FedEx’s vice president of flight operations and training, said in a Friday memo to flight crews that the airline is “significantly overstaffed” and can’t guarantee pilots more than the minimum number of hours set in their contracts.
He urged pilots to consider taking a job with American Airlines (NASDAQ: AAL) subsidiary PSA Airlines, which is offering FedEx pilots an expedited interview process for a captain position, a $250,000 signing bonus, and a direct path to flying for American. Mainline U.S. passenger airlines have successfully replenished cockpit crews after the COVID crisis at the expense of feeder airlines, many of which have curtailed operations because of the shortfall in qualified pilots.
“While I understand this is not something that will appeal to every pilot, for those of you who are frustrated with current flight hours, career progression, or have just been on on the fence about available options, you may consider this unique opportunity enough of an incentive to make a move,” DiMento wrote. He said American Airlines has enjoyed good relations with FedEx for several years and understands the quality of FedEx pilots.
The memo was published on X, formerly known as Twitter, by aviation blogger JonNYC.https://platform.twitter.com/embed/Tweet.html?creatorScreenName=https%3A%2F%2Ftwitter.com%2Fericreports&dnt=true&embedId=twitter-widget-0&features=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%3D%3D&frame=false&hideCard=false&hideThread=false&id=1720558574630314039&lang=en&origin=https%3A%2F%2Fwww.freightwaves.com%2Fnews%2Ffedex-tells-pilots-to-switch-to-american-airlines-feeder-operator&sessionId=4912a1188de11c08113bd89c46cac8686adeff08&siteScreenName=freightwaves&theme=light&widgetsVersion=01917f4d1d4cb%3A1696883169554&width=500px
FedEx (NYSE: FDX) has about 5,800 pilots on its payroll. DiMento told Express crew members in July that the company has a surplus of about 700 pilots, according to reporting by the Wall Street Journal and confirmed by FreightWaves. The number of excess pilots is likely more than that now given the continued deterioration in the parcel and freight markets.
The effort to trim the pilot workforce follows UPS in August offering voluntary severance packages to senior pilots to eliminate nearly 170 positions. Many UPS pilots (NYSE: UPS) are working the lowest amount of hours allowed.
Pilots who sign on with PSA will fly Bombardier CRJ700 and CRJ900 aircraft with about 65-70 seats, and earn a starting wage of $150-$217 per hour, depending on seniority, according to the PSA recruiting page. PSA’s website says pilots can move up to American Airlines in five years. It’s not clear if FedEx pilots will be on an expedited track.
A FedEx pilot, speaking on condition of anonymity, called DiMento’s letter “incredibly insulting” to veteran crew members who can go straight to a large airline.
“For those of us who have been with the company before COVID, we are shocked at the level of mismanagement we see and management’s disdain for their pilots. Pat DiMnto’s letter suggesting that pilots at the-once pinnacle of airline pilot jobs go to a regional airline for five years speaks volumes to their tone deafness about the situation they created. Someone flying for FedEx could go to a legacy flying job — Delta, United, American — and have a much higher quality of life and pay and benefits,” he said in an email exchange.
The source said pilots are making less money because flying hours have been drastically reduced in the face of lower volumes, with available flying slots spread thin among the pilot group. His regular pay has been cut back by 30% this year and pilots no longer can secure trips that pay a premium for working on a scheduled day off. The captain said he knows colleagues who have left for other airlines.
Under the existing contract, FedEx pilots are paid between $81 and $336 an hour based on factors such as the type of plane they fly and their seniority. Pilots typically have a minimum guaranteed 68 hours of work a month. A junior first officer will earn nearly $102,000 per year while a senior captain collects more than $363,000 in pay and benefits per year flying an average number of hours.
A captain who works 40 years at FedEx can expect to make slightly more than $20 million in pay, benefits and retirement over his or her career compared to the industry average of about $18.8 million, according to analysis by aviation analyst Kit Darby. But the total compensation now lags Alaska Airlines, Hawaiian Airlines, Delta Air LInes, American Airlines, United Airlines and UPS, where a pilot can make $24 million. The career value at FedEx for 30 years of service is better than Alaska, Delta and Hawaiian, but still behind the others.
Freight correction
The FedEx memo underscores how financially difficult the market has become for freighter operators in the past 18 months, with volumes and rates hovering at or below 2019 levels. Global air cargo volumes are down more than 8% since the first quarter of 2022 and rates were 40% to 50% lower for most of the year versus 2022 — a function of weak manufacturing, a slow drawdown of excess inventories, retailers’ reluctance to restock because of uncertainty about consumer behavior and macroeconomic crosswinds.
Lufthansa Cargo on Thursday reported cargo revenues were down 43% in the third quarter and that it broke even after a $352 million operating profit during the same period in 2022. Other publicly listed passenger airlines, many of which don’t operate freighters as does Lufthansa, have seen logistics revenues decline 30% to 40% so far this year. The global cooling in freight transportation, including airfreight, led Air Canada to cancel an order with Boeing for two 777 freighters.
The squeeze is especially acute for many smaller all-cargo operators that don’t have the massive customer base, diversified business lines and strong balance sheet of a FedEx or UPS. Many small and mid-tier cargo airlines are coping with attrition as pilots switch to major passenger airlines.
FedEx management is prioritizing stringent cost controls across the company, with a goal of eliminating $4 billion in structural costs by June 2025, including $700 million in annual savings from flight operations. The cost initiative includes accelerating the retirement of aging MD11 freighters, reducing main deck cargo capacity flown by its purple tail fleet and outsourcing more activity to third parties, increasing point-to-point flying, downgauging aircraft size on certain routes and diverting more volume to the ground network. FedEx plans to phase out another 29 aircraft in the fiscal year ending May 31.
The combined moves are intended to give FedEx more operational flexibility and allow it to densify its hub-and-spoke system.
In April, FreightWaves reported that FedEx will close pilot bases in Cologne, Germany; Anchorage, Alaska; and Los Angeles as well as its heavy maintenance hangar at Los Angeles Airport. It will shift the maintenance functions to its Indianapolis regional hub because the transition to a more modern fleet requires less maintenance capacity.
FedEx’s mainline jet fleet grew from 385 in 2018 to 417 in 2022 and now stands at 413, according to the latest company statistics. The airline continues to receive new 767 and 777 widebody freighters under a long-standing order with Boeing.
The pilot source blamed FedEx for taking on too many contracts during the pandemic boom and rapidly expanding infrastructure when it couldn’t maintain high service levels, a situation previously echoed by equity analysts.
FedEx and UPS domestic flight utilization underperformed against seasonal comparisons for September, according to research by Morgan Stanley transportation analyst Ravi Shanker. FedEx’s flight count tumbled 9% month over month vs. minus 7% on average and is down 11% year over year. UPS domestic flight activity fell 12%, double the normal September dip from August, and remains down 19% against 2022.
“A slowing economy, large customer contract negotiations and slowing pilot retirements with an already overmanned crew force have forced me to accept the fact that I might be seeing more folks that I once personally called to offer a position at FedEx accept offers elsewhere,” DiMento said in the memo. “I have no doubt that FedEx will continue to navigate the turbulent market conditions that are inherent in this business and will remain a great place to work for pilots and others in the long term.”
Contract talks restart
FedEx pilots in July rejected a tentative agreement on a new contract that would have increased pay by 30% over five years. Many pilots complained the deal offered weaker job protections, insufficient back pay, bad alternative pension options and pay increases below those recently achieved by pilots at American, Delta, Hawaiian and United airlines.
FedEx, for its part, has said the agreement addressed some quality-of-life issues and offered protections, including making it harder for the company to furlough pilots.
In late October, the FedEx Master Executive Council of the Air Line Pilots Association (ALPA) elected Capt. Billy Wilson as chairman through March 2025. He replaces Chris Norman, who stepped down after failing to push through the new labor agreement.
Norman, in a Sept. 14 letter to members, alluded to the poor state of relations between pilots and management.
“FedEx pilots do not trust FedEx when it comes to their job security due to a combination of factors, particularly management’s public statements concerning greater reliance on third-party lift. This concern will need to be addressed by developing new contractual language, the negotiation of which may be highly contentious. Beyond that, the FedEx pilots are very concerned about management’s attempt to drift away from providing a compensation and quality-of-life package that is competitive with those contracts reached this year at other major U.S. carriers,” he said.
Wilson in a message to members criticized FedEx for pushing the PSA offer and questioned the timing of the announcement ahead of new contract talks.
“Instead of publishing PSA’s offer to entice pilots to end their FedEx career, why not make offers at the bargaining table that respect what FedEx pilots have done for the company? If management is comfortable with pilots leaving, they should instruct their bargainers to make proposals to entice pilots who are otherwise waiting to retire. UPS, a fully unionized company, made the smart business decision to offer buyouts of their most expensive pilots to help with possible overmanning issues,” he said.
ALPA and FedEx are scheduled to hold an initial bargaining session Nov. 6-7 in Memphis, Tennessee, under the auspices of the National Mediation Board, said union spokeswoman Courtney Bland.
Upon taking over as head of the governing body for FedEx’s unionized pilots, Wilson said a statement, “Our compensation should be commensurate with our peers while including excellent quality of life with our work rules and a retirement that will provide for pilots in the future. During COVID, FedEx pilots stood tall delivering for the company and the world while many of our pilots suffered in inhumane and substandard living conditions including lockdowns and exposure to unknown chemicals. We paid a heavy price for this while the company made historic profits.
“I am committed to bringing all of our pilots together as we reestablish negotiations capitalizing on our diverse views, which only make us stronger, as we move toward a contract we have earned.”
Scott Struminger, CEO of Aviation at FedEx, said in September at a freighter forum for aircraft buyers and sellers in Seattle, that FedEx offers better work conditions than commercial passenger airlines because they typically fly to a destination, rest for a few hours, and return instead of making multiple stops throughout the day.
The FedEx pilot who did not want to be identified said colleagues who were hired during the COVID boom feel misled about job perks and never needing to look for another job.
“They realize the hype surrounding this job wasn’t true and the quality of life and pay are not what they were sold. And because the process of switching airline jobs and dealing with the loss of seniority at the next airline is so onerous, many feel trapped and that they made a mistake coming to FedEx. I believe there’s a lot of regret, but many are keeping it to themselves because they don’t want to admit they made a career mistake,” he told FreightWaves.
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