FedEx Pilots Face Pay Cuts, Buyouts as Contract Talks Resume

An additional 200 to 300 pilots could become redundant late this year if the company, as expected, loses a large chunk of work for the U.S. Postal Service, a senior executive recently told a group of airline employees.

The attempt to shed pilots, who have already absorbed a steep decline in pay, comes as collective bargaining resumes for a new contract.

Management is likely to invoke contract clauses that would allow it to go below the minimum guarantee of 68 flight hours per month when available flying time falls below certain thresholds, said Pat DiMento, FedEx’s vice president of flight operations and training, in a secretly recorded meeting with pilot evaluators that was shared with FreightWaves. Pilots get credit for the minimum number of hours regardless of how many hours are actually flown.

FedEx Express, the largest cargo airline in the world, has essentially been able to pay the equivalent of 200 fewer pilots since the summer by limiting distribution of flight schedules, effectively reducing the current surplus of employees, he said. 

FedEx expects 350 to 450 pilots to accept early-retirement incentives when a deal on a new labor contract is reached, which would allow the company to maintain current minimum credit hours and flight schedules, said DiMento.

In the absence of a tentative contract, the airline would need to reduce the crew list by 200 individuals any way possible to prevent further cuts to pay guarantees. Achieving that figure — through retirement, resignation, leave of absence or offers from competitors — would save the company $50 million per year.

Average daily parcel volume for FedEx Express declined 2 percent and global average daily freight pounds fell 18 percent year over year in the quarter ended Nov. 30. Express volumes were down more than 10 percent for three consecutive quarters through last February and then shrank at single-digit levels for the remainder of 2023. 

FedEx planners are already noticing a decline in January volumes and removing flight hours they previously expected to operate, the flight operations chief recently told the quality control pilots. It was a friendly audience because they are quasi-supervisors that sit between line pilots and management. 

“Unless we get a new contract, it’s [pilot pay] not going to magically fix itself because I don’t see the economy turning around,” DiMento said.

Investors were disappointed that major operational savings at FedEx were unable to fully offset lower revenue during the second quarter. Express faces higher labor costs if pilots secure a contract upgrade and newly mobilized mechanics are able to form a union.

Both outcomes are far from certain. 

Workers at Amazon fulfillment centers, Starbucks locations, and other businesses have voted in recent years, for varying reasons, against joining a union. And pilots had more leverage a year ago when major passenger airlines scrambled to refill positions after the pandemic as travel demand spiked. Delta Air Lines plans to hire half as many pilots this year as it did in 2022 and 2023 because the pilot shortage has eased, according to Aero Crew News.

Meanwhile, FedEx is now downsizing internal fleet operations to eliminate excess capacity and is looking to shed pilots amid diminishing parcel volumes.

FedEx cockpit crews, represented by the Air Line Pilots Association (ALPA), in July rejected a tentative contract worth $3.8 billion that would have increased pay by 30 percent over 4.5 years and are back at the bargaining table.

The last round of negotiations, mediated by the federal National Mediation Board, took place Dec. 12-15, and the sides are scheduled to meet again Thursday and Friday. Two more bargaining sessions are set for January.

A majority of FedEx pilots were displeased with the agreement’s level of job protections, back pay, pension options, and quality-of-life considerations and the fact that pay increases were below those achieved by passenger-airline counterparts. Pilots at Southwest Airlines, for example, are considering whether to accept a new contract that would raise pilot pay 50 percent over five years.

After FedEx announced it is accelerating a $1 billion share buyback, ALPA last week said the company should also invest in cockpit crews to provide stability for long-term growth. The union argues pilots deserve to be compensated for the sacrifices and risks taken so the company could earn record profits during the COVID crisis.

Deep division within the pilot group could hamper chances for a quick deal. A slim majority voted to kill the tentative contract, and some wanted to recall the negotiating committee. Those pilots are upset with ALPA for being too accommodating toward FedEx, including in a 2015 contract they say eroded schedule flexibility and other quality-of-life issues. 

Many union members have lost faith in the ability of Capt. Pat May, the chairman of ALPA’s FedEx negotiating committee, to deliver a favorable labor agreement, especially after he did not resign, as promised, when the tentative deal went down last summer, a pilot told FreightWaves. The source asked not to be identified so as not to jeopardize his job or union relationship.  

Pilots over the years left carriers such as American, Delta, United, and Southwest for what they believed were better jobs at FedEx.

“Our work rules are well below our passenger peers. Pay and compensation is starting to lag and stagnant. We fly horrendous schedules which affect our health,” the pilot said. “This entire situation may have killed the best airline job in America.”

Hourly pay scales vary by type of aircraft flown and seniority. A widebody (MD-11 or Boeing 777) captain at FedEx makes $277 in the first year and $326.50 with 12 years on the job, according to data compiled by the Air Line Pilots Association. That compares to $345 per hour in year one at Hawaiian Airlines, a new entrant in the freighter space, to fly the Airbus A330. After a dozen years at Hawaiian, a freighter captain can make $376 per hour. Pilots at UPS make $344 per hour, after an initial probation year, and $366 by year 12.

A veteran FedEx captain pulling a typical 80 to 90 hours per month annually makes about $363,000 in pay and benefits, compared to about $396,000 at UPS, according to analysis by Kit Darby, an aviation labor consultant. A senior captain at Delta Air Lines or United makes about $416,000 per year.

DiMento indicated that FedEx plans to offer the same amount of total money to the pilots in this go round as it did in the tentative agreement, but reallocate it differently between retirement, higher pay scales, signing bonuses or other buckets. 

The worth of the contract will be more than last July because higher pay rates and signing bonuses will have accrued since then and will be retroactively covered in the new contract, DiMento explained.

One of the check airmen, who said he voted in favor of the negotiated contract, questioned if the strategy will work.

“The young guys, their mentality is, ‘We came to this premier airline and we want a premier contract.’ I don’t know if they are going to go for it,” he told DiMento. The total compensation and lifestyle for a veteran FedEx pilot compares very favorably to one at Delta, he added, “but they don’t listen.”

Many pilots were concerned that language prohibiting outsourcing to third-party airlines if FedEx reduces flight hours or furloughs pilots wasn’t strong enough in the tentative agreement, but DiMento stressed management wants to maximize use of its own aircraft and won’t seek operating leases when its own pilots aren’t busy. He said that FedEx wanting long-term transportation service agreements to replace in-house flying undermined passage of the interim contract.

When the parties began negotiations in 2021 to amend the existing contract, the FedEx fleet was maxed out to meet soaring freight and parcel demand, stoked by people buying goods online rather than services because of social distancing during COVID.

The market has drastically changed since then, with e-commerce growth returning to normal and air cargo volumes contracting for nearly 18 months. FedEx Express was hiring pilots as fast as it could and didn’t forecast the severity of the downturn. The company now has more aircraft and pilots than needed to fly current volumes.

There are about 700 surplus pilots out of 5,800 on the payroll, according to FedEx officials. 

In the fall of 2022, FedEx launched an initiative to take out $4 billion in structural costs, especially in the air network, and redesign the entire parcel distribution network for greater efficiency. The air overhaul could make FedEx Express less reliant on aircraft than in the past.

The air and international unit flew fewer hours in 2023, deactivated aircraft until demand returns, accelerated the retirement of older planes, and flew more direct routes. Since the company still has new freighters on order, it’s unclear if the total fleet size will decrease. FedEx last year decided to close three pilot bases in the U.S. and overseas and its Los Angeles airport maintenance facility in 2024. The repair jobs will be sent to Indianapolis.

FedEx is only providing the minimum number of flight hours guaranteed in the existing contract. Pilots are making substantially less money because they have to share a smaller pool of flying assignments. One pilot contacted by FreightWaves said his pay has been cut back 30 percent this year.

In November, management prodded pilots to consider job openings at PSA Airlines, a regional feeder carrier owned by American Airlines, that offered incentives to attract FedEx and UPS pilots.

The FedEx pilot said he had not heard of any colleagues taking the PSA deal. Pilots said in online chat forums that they considered the request disrespectful to veteran crew members who can go directly to a large airline and enjoy superior benefits. PSA did not respond to a message about the success of the recruiting effort.

Since few pilots have been willing to voluntarily leave so far, guaranteed pay could soon fall to about 60 or 61 hours per month, DiMento told the check airmen. That would effectively reduce pilot rolls by an additional 100 individuals and save FedEx about $100 million per year.

He speculated that it would take a $500,000 exit package today to entice some pilots into early retirement because many near eligibility are holding off until a new contract is in place. Normally, about 140 FedEx pilots retire at the end of each year, but only about 40 captains did so in 2023.

When a contract is finalized, FedEx will make it attractive to retire by waiving the requirement for giving notice of early retirement and enhancing the severance package, said DiMento.

FedEx has to balance a new contract offer against the economic realities it faces. It can’t afford to give pilots $500 million extra to close out a deal, DiMento said, when it’s struggling to generate revenue.

“In this business environment, as a pilot you can’t go in there asking for the world. It’s just not going to happen,” he said.

And, the flight operations chief added, the substantial loss of the existing U.S. Postal Service contract means FedEx will have 200 to 300 more excess pilots by October. The Postal Service is in the third year of a transformation plan that includes migrating most air volumes to ground transportation to save money.

Meanwhile, FedEx Express mechanics recently launched a campaign to join the Teamsters union.

The organizing effort targets about 5,500 to 6,000 aviation, truck and facility mechanics, and possibly some maintenance workers at FedEx Express, said Teamsters spokesman Matt McQuaid in an email exchange.

Hundreds of technicians have signed authorization cards saying they want the Teamsters to represent them in collective bargaining, the union said in a Dec. 20 news release.

The Teamsters’ goal is to petition the National Mediation Board for a representation election within the next few months, McQuaid said. The NMB will conduct an election if employees or a union is able to collect signatures from at least 50 percent of workers in a potential bargaining unit. Labor relations for airlines are governed by the Railway Labor Act, which highly regulates bargaining procedures that unions and employers must follow, and facilitated by the NMB.

That means any union has the harder task of winning national support across the country instead of organizing individual facilities at the local level.

“The response has been overwhelming,” said Joe Ferreira, director of the Teamsters Airline Division, in a Nov. 13 letter to workers in which he accused FedEx management of engaging in “an anti-union propaganda campaign that grossly misrepresents the factions of your unionization drive, the National Mediation Board process, and disregards federal law.”

According to ZipRecruiter, the average aircraft maintenance technician at FedEx makes $72,000 per year.

The FedEx campaign comes as the Teamsters have tried for more than a year to organize technicians at Delta Air Lines.

“We’re aware the Teamsters are targeting our mechanics at FedEx Express. We respect the right of our employees to choose whether or not to support such efforts. We are incredibly proud of the culture we have built over the past 50 years that empowers our employees’ voices; values their creativity and contributions; and encourages collaboration that is important to them, their career, and our future,” FedEx said in a statement to FreightWaves.

The Teamsters last year chalked up significant wins in the express logistics sector. An aggressive strategy by new President Sean O’Brien forced UPS to grant big pay increases to 340,000 workers while 1,100 ramp workers at DHL Express’ Cincinnati air hub won their first contract, pending ratification, after a 12-day strike.

Satish Jindel, the CEO of consultancy ShipMatrix, said in an interview that “the Teamsters should look for a better target [than the FedEx mechanics] where the law may not limit them and working conditions and wages are bad.”

Editor's Note: This article first appeared on FreightWaves.