FedEx and pilot pay expectations
07-13-2005, 10:11 AM
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FedEx and pilot pay expectations
Did You Know...
FedEx Express recently paid a consulting company (Charles River Associates) to study the current state of the airline industry, how it got there, and where it's going. Additionally, they funded a symposium held at The National Press Club on 23 May where The New Republic's senior editor led a panel discussion with Mark Kiefer of Charles River, Darryl Jenkins of The Aviation Institute at George Washington University, Paul Page of Traffic World, and our old friend and fellow aviator, Kit Darby of AIR Inc.
Allow me to highlight their conclusions regarding the developments in future pilot compensation:
1) An overall reduction in the industry average value of total compensation across carriers
2) A convergence of wages between those historically offered by the legacy carriers and the low cost carriers (LLC), but with the average being closer to the LCC level
3) A significant reduction in value of retirement benefits and the replacement of pension benefits with 401(k) plans combined with profit sharing
And finally their recommendation, "given the current reality of the industry, contract negotiations would benefit greatly from a forward-looking perspective, rather than focusing on past concessions or financial performance. Competition in this industry will only increase in the future, and the lesson of the present is that those carriers that best prepare for the next market reality will be best equipped to provide competitive compensation in the long term."
This article is not the last time you will likely hear the results of this study. It is interesting to note that one of the authors of the study is a gentleman by the name of Mark Berkman. Mr. Berkman is Vice President and Director of employment economics with Charles River and he advises clients regarding labor disputes. So now the objective of our company's "investment" in this study becomes quite clear; after 30 years of trying to convince you that you are not an "airline pilot," now you will be lumped in with every low cost/ bankrupt people hauler on the planet and made to believe you are not worth what you are paid.
Several obvious points should be made in response to their conclusions:
1) We are not in the airline industry and our air operations reflect that reality. Our pilot costs are less than 4% of revenues compared to an average major passenger carrier's pilot costs of nearly 10%.
2) We are the most productive pilots on the planet with each of our 4000 pilots out flying the line generating about $5,000,000 in annual revenue (Express revenue only) or roughly $375,000 in operating income (revenue minus operating expenses) for this corporation every year. That means this corporation could triple total pilot compensation and still make a profit.
3) Benefits are a form of deferred compensation. Those benefits that have been promised (like retiree health care), have already been earned. If they want to renege on the promise, they must know we would never accept pennies on the dollar for the value of those benefits.
In summary, it's never just about the money. The incremental improvements we are asking for in this contract are affordable and appropriate. Don't sell yourself short when the "gloom and doom" propaganda hits the street.
Continue to support your Negotiating Committee.
The Retirement and Insurance Committee
FedEx Express recently paid a consulting company (Charles River Associates) to study the current state of the airline industry, how it got there, and where it's going. Additionally, they funded a symposium held at The National Press Club on 23 May where The New Republic's senior editor led a panel discussion with Mark Kiefer of Charles River, Darryl Jenkins of The Aviation Institute at George Washington University, Paul Page of Traffic World, and our old friend and fellow aviator, Kit Darby of AIR Inc.
Allow me to highlight their conclusions regarding the developments in future pilot compensation:
1) An overall reduction in the industry average value of total compensation across carriers
2) A convergence of wages between those historically offered by the legacy carriers and the low cost carriers (LLC), but with the average being closer to the LCC level
3) A significant reduction in value of retirement benefits and the replacement of pension benefits with 401(k) plans combined with profit sharing
And finally their recommendation, "given the current reality of the industry, contract negotiations would benefit greatly from a forward-looking perspective, rather than focusing on past concessions or financial performance. Competition in this industry will only increase in the future, and the lesson of the present is that those carriers that best prepare for the next market reality will be best equipped to provide competitive compensation in the long term."
This article is not the last time you will likely hear the results of this study. It is interesting to note that one of the authors of the study is a gentleman by the name of Mark Berkman. Mr. Berkman is Vice President and Director of employment economics with Charles River and he advises clients regarding labor disputes. So now the objective of our company's "investment" in this study becomes quite clear; after 30 years of trying to convince you that you are not an "airline pilot," now you will be lumped in with every low cost/ bankrupt people hauler on the planet and made to believe you are not worth what you are paid.
Several obvious points should be made in response to their conclusions:
1) We are not in the airline industry and our air operations reflect that reality. Our pilot costs are less than 4% of revenues compared to an average major passenger carrier's pilot costs of nearly 10%.
2) We are the most productive pilots on the planet with each of our 4000 pilots out flying the line generating about $5,000,000 in annual revenue (Express revenue only) or roughly $375,000 in operating income (revenue minus operating expenses) for this corporation every year. That means this corporation could triple total pilot compensation and still make a profit.
3) Benefits are a form of deferred compensation. Those benefits that have been promised (like retiree health care), have already been earned. If they want to renege on the promise, they must know we would never accept pennies on the dollar for the value of those benefits.
In summary, it's never just about the money. The incremental improvements we are asking for in this contract are affordable and appropriate. Don't sell yourself short when the "gloom and doom" propaganda hits the street.
Continue to support your Negotiating Committee.
The Retirement and Insurance Committee
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