Air cargo/parcel shipping: UPS pilots furloughed as part of cost-cutting effort

The Independent Pilots Union (IPA), which represents pilots flying for UPS, said this week that 54 pilots will be furloughed on Sunday, May 23.

This follows a February announcement from UPS that stated the company planned to furlough at least 300 of its 2,800 pilots represented by the IPA as part of a cost-cutting initiative. UPS officials said at the time it was actively working with the IPA “avert or mitigate layoffs before they take effect.” In February, UPS added that if furloughs were to occur, the first 170 pilots would be furloughed in May.

This news follows a June 2009 agreement between UPS and the IPA in which they reached terms on money-saving measures totaling $131 million over three years. As part of this deal, UPS and the IPA pledged to not have any pilot furloughs until April 1, 2010. And UPS officials said at the time that voluntary pilot savings generated in 2009 could potentially eliminate any proposed layoffs, adding that savings identified by the IPA have been produced through voluntary programs, including pilots taking short- and long-term leaves of absence; military leaves; job-sharing; reductions in flight-pay guarantees; early retirement; and sick bank contributions.
But according to an IPA statement, they claim UPS said in January of this year that UPS now needed $244 million in cost-savings measures through 2015, up from the $131 million over three years in June 2009, with a preference for “compulsory savings,” which the IPA said indicates furloughs.
IPA Captain Robert Thrush said that when UPS nearly doubled its original request, IPA pilots “were more than willing to step up, extend and expand the Voluntary Jobs Protection Program to cover UPS’s demands and keep the 300 [pilots] employed.”
UPS officials told LM in an e-mail that the furloughs are needed at this time, because at the moment they have more crewmembers than needed to operate its airline. They explained that UPS is flying 48 fewer aircraft—214 compared to 262—than it was at its peak in 2003.
“We have permanently retired our older, three-person aircraft in favor of larger, more efficient aircraft,” said UPS Director of Global Services Norman Black. “At one time those 727, DC-8 and classic 747 fleets accounted for 400 flight engineers for whom there is no longer a need.”
What’s more, UPS is flying 15 fewer block hours—the amount of time planes are in flight—than in 2007 before the recession kicked in. And UPS added that the FAA’s 2007 “retirement age 65” ruling has kept 200 pilots on the payroll whom previously would have been required to retire at age 60.

UPS also said it been able to absorb some of its excess pilots into its active fleet types. As an example, it said it spent a year retraining about 100 former DC-8 crewmembers on other aircraft types, but there simply are not places for all of the additional crewmembers. And at an average expense of $185,000 per year in pay and benefits, a well-run airline cannot afford to just “carry” pilots in hopes that business will improve quickly, the company explained.
“We understand the impact of these furloughs on our employees and their families,” said Black. “In fact, many of our airline’s top managers were furloughed by other airlines before they came to UPS, so they have first-hand knowledge of this taxing experience.
Our understanding of the effect of a furlough is why we spent over a year working exhaustively with the union on voluntary alternatives to avoid any kind of job cut. In the end, however, the union could not guarantee us the kind of concrete savings the company required.”
UPS pilots that are furloughed will be compensated for accrued sick time, even though the company is not contractually obligated to do so. For many of these crewmembers, this will amount to roughly $20,000 and will help defray some of the costs associated with the furlough, according to UPS.
Jerry Hempstead, president of Orlando-based Hemsptead Consulting, said these furloughs were expected.

“Air volumes have been migrating to ground for some time where the guaranteed surface delivery time is equal to, better than or acceptable trade off, to air,” he said. “UPS over time adjusted its network flight operations to account for the declining air volumes (this cant be done overnight , in the overnight business). The economy has taken its toll in idling aircraft in everyone’s domestic network (not just UPS but Fed and DHLs domestic air network as well).”

Hempstead pointed out that the pilots worked with management to take some measures to keep the pilots on the payroll, however, the number of air shipments has not returned. And he noted that now that the tailwind of the exit of DHLs domestic exit is gone (since January 30, 2010), UPS can see that air is not coming on as they might have hoped, as it now has Feb, March and April data without DHL tailwind obscuring the true state of the economy and have a feel of the real pulse of where things are going.