UPS May Furlough At Least 300 Pilots Unless Cost Reductions Are Identified
By Rip Watson, Senior Reporter
This story appears in the Feb. 15 print edition of Transport Topics. Click here to subscribe today.
UPS Inc. said it plans to furlough at least 300 of its pilots if talks with the union fail to produce steps that will lower costs.
The package carrier, which has about 2,800 pilots, said layoffs could be mitigated or averted if adequate cost reductions are identified. The first 170 pilots would be furloughed on a phased basis with the first group laid off in May.
The company’s pilots are represented by the Independent Pilots Association, which has been in discussions with the company for at least a year to make those cost reductions. The union did not return calls seeking comment.
“Even though the economy has begun to turn around, UPS anticipates a very gradual recovery and a continued need for belt-tightening,” said UPS Airlines President Bob Lekites. “This is a painful decision for our people, but one that is right for the on-going health of our business.”
“We applaud our pilots for the way they’ve joined with UPS in trying to tackle this problem and hope we can identify a mutually beneficial outcome,” Lekites said. “We continue to go well beyond our contractual obligation to seek a ‘win-win’ solution to avert furloughs.”
Steps to lay off pilots, if they occur, would be the latest round of cost-cutting and productivity improvements announced by the company.
In January, the company said it would cut 1,800 jobs in management and administrative ranks by consolidating regional offices without cutting back on service.
During 2009, the company froze management salaries, reduced capital spending, retired aircraft and suspended matching contributions to 401(k) pension plans.
In June, voluntary steps were identified by the union to achieve what the company called in a Feb. 8 statement “significant savings.” Those changes included job-sharing, early retirement, leaves of absence, lower guaranteed pay for flights operated and military leaves.
As a result of those changes, the company agreed that no pilots would be furloughed last year.
Talks since June have been continuing to find added cost reductions, but the company said those talks “have failed, however, to identify sufficient operating savings.”
“The bottom line is that we’re overstaffed with pilots,” UPS spokesman Norman Black told Transport Topics on Feb. 8.
He noted that volume for express packages isn’t as high as the company would like and reduces the need for flights.
Part of the overstaffing resulted from the replacement — and retirement — of planes that required a crew of three with newer aircraft that need just two crew members.
In a separate development, UPS on Feb. 4 said it was raising its dividend by 2 cents a share to 47 cents.
The increase from 45 cents on a Class A and Class B shares will be payable on March 3. It will be received by those who hold shares as of Feb. 16.
“UPS has demonstrated a consistent ability to generate significant free cash flow,” said UPS CEO Scott Davis. “Our outlook for a gradual economic recovery and the expectation of strong performance in 2010 justifies this dividend increase.”
UPS, which late last year marked its 10th year as a public company, has more than doubled the dividend in less than seven years. For the past four decades, the dividend has either been maintained or increased, UPS said in a Feb. 4 statement.
