Consultant’s Insight: FedEx pilots reject contract proposal

FedEx pilots yesterday voted to reject a tentative agreement with the company with a 57% majority, a surprise move that will result in a return to the table to continue negotiations. “Our members have spoken, and we will now regroup and prepare for the next steps,” Chris Norman , chair of FedEx Air Line Pilots Association (ALPA), said in a statement. “In the coming weeks, the FedEx ALPA leadership will meet to establish a timeline for assessing pilot group priorities moving forward. FedEx pilots remain unified, which will drive a new path to help produce an agreement that all FedEx pilots will be proud to support.” [caption id="attachment_68221" align="alignleft" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] FedEx issued a statement following the contract rejection, saying, “The tentative agreement voting results have no impact on our service as we continue delivering for our customers around the world. The parties will return to negotiations under the supervision of the National Mediation Board . While we are disappointed in these voting results, FedEx will continue to bargain in good faith with our pilots to achieve a fair agreement for all FedEx stakeholders.” Possible pilot concerns While it’s unclear why many FedEx pilots voted against the contract, one could surmise that compensation was inadequate. Several other pilot unions, for example, have held the recent agreement between Delta Air Lines and its pilots as the standard in negotiations . Delta offered its pilots a contract that increases pay and benefits by $7 billion. The FedEx contract proposal may have fallen short of that expectation. Another concern could be job security. FedEx’s organizational plan, announced in April, could be raising a few eyebrows within the organization. Among its measures is a reduction of at least $700 million in costs within the Express division by fiscal 2025. FedEx plans to reduce costs in part by reducing flight hour costs, focusing on balanced lanes, consolidating for density and executing its Global Partner Network, i.e., using third-party carriers for non-time-definite and less profitable cargo. In addition, during its fiscal fourth-quarter earnings call in June, FedEx noted that within FedEx Express, U.S. freight pounds were down more than 25% due to a change in strategy from the U.S. Postal Service (USPS), its largest customer and one that is shifting cargo away from air transportation to ground. According to FedEx’s latest 10-K report , filed this month, “Changes in the business or financial soundness of the USPS, including strategic changes to its operations to reduce its reliance on the air network of FedEx Express, are likely to have an adverse effect on our results of operations and financial condition. The USPS is the largest customer of FedEx Express, which provides domestic air transportation services for the USPS’ first-class mail, priority mail express and priority mail, and transportation and delivery for the USPS’ international delivery service.” Growing uncertainties It remains uncertain when and how successfully FedEx will implement its organizational changes. Integrating TNT , for example, took at least six years. This organizational change is much bigger than the TNT integration. Also, FedEx’s contract with the USPS expires in September 2024. If FedEx succeeds in negotiating a new contract, it will certainly look different and likely will require a smaller number of pilots. So, it’s back to the table for both sides and without concerns of an immediate strike. While FedEx pilots authorized a strike in May, they are governed by the Railway Labor Act. As such, according to FedEx, a strike is only possible with the permission of the National Mediation Board. It can only occur after the parties have passed through multiple legally mandated steps and when other safeguards, such as presidential or congressional intervention, do not happen. Join Air Cargo Next for the second annual Air Cargo Tech Summit on Monday, Sept. 18, and Tuesday, Sept. 19, at the Brussels Marriott Hotel Grand Place in Belgium. For more information on the summit and to register, click here .

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