United Airlines
pilots are in line for a bumper pay rise of up to 40% after the carrier reached an agreement in principle with the pilots’ union.
The agreement, which still needs to be ratified by pilots, will increase pay rates by 34.5% to 40.2% over four years, and is worth an estimated $10 billion in value, the Air Line Pilots Association (ALPA) said Saturday.
Airlines have been negotiating new contracts over the past 18 months, with many pilots still on prepandemic 2016 pay levels. A shortage of aviators, along with surging travel demand since the Covid-19 pandemic, has strengthened pilots’ negotiating position and helped secure bumper deals.
While United’s (ticker: UAL) tentative deal means most major carriers, with the notable exception of
Southwest Airlines
(LUV), have reached some sort of agreement, the industry’s long-running saga over new pay contracts isn’t over just yet.
American Airlines
(AAL) pilots will begin voting on their preliminary agreement later this month. The pilots will undoubtedly have one eye on United’s deal when considering whether to ratify their new contract. Offers from rivals have led to airlines increasing their own pay proposals on several occasions over the past year or so.
“American Airlines stated that it would match its peers’ pilot agreements—as such, it is unclear whether any aspect of this [United’s] agreement in principle could lead American Airline to sweeten its offer,”
Citi
analysts, led by Stephen Trent said.
Southwest’s pilots moved closer to strike action last month when the
Southwest Airlines
Pilots Association asked to be released from federal mediation. The union said 99% of its pilots voted to authorize a strike in May.
Delta Air Lines
set a high bar earlier this year when it agreed to increase wages by 34% over three years, which has put pressure on its rivals.
United has seemingly responded, with a much improved offer from the 14.5% pay rise over 18 months that was rejected in November.
The agreement includes improvements to quality of work-life balance, job security, work rules, retirement and benefits, ALPA said in a statement.
“We promised our world-class pilots the industry-leading contract they deserve, and we’re pleased to have reached an agreement with ALPA on it,” United CEO Scott Kirby said in a post on LinkedIn.
“Although many details are unknown at this time, including pay increases by aircraft type, adjustments to lifestyle benefits, etc…, this agreement would seem to at least lower the temperature around the carrier’s labor negotiations,” Citi’s Trent said.
United stock rose 0.2% ahead of the open Monday.
The issue of increased labor costs has lessened in investors’ minds in recent months, as fuel costs have fallen sharply and as travel demand has remained strong into the summer months—boosting the sector’s stocks.
But the weeks ahead are crucial for several airlines as they look to lock in pay deals and provide some sort of certainty over labor costs in the medium term. The longer it goes on, the more likely the carriers will have to pay more for labor.
Delta’s bumper pay deal, ratified in March, is looking better by the day.
Travelers endured another weekend of disruption as more than 1,700 flights into, out of, and within the U.S. were canceled Sunday due to severe weather in the Northeast. Hundreds of flights were canceled at Newark Liberty International, John F. Kennedy, LaGuardia, and Boston Logan airports, according to flight-tracking website FlightAware.com.
JetBlue Airways
(JBLU), which has a strong presence in the Northeast, was the worst affected airline, canceling 322 flights, or 31% of its schedule, and delaying a further 485.
Cancellations continued into Monday morning, albeit to a lesser extent. Around 280 flights were canceled as of 8 a.m. Eastern time, with JetBlue canceling 73 flights, or 7% of its schedule.
Write to Callum Keown at callum.keown@barrons.com
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