Parcel shipping: UPS and pilots union reach accord on costs savings efforts
Agreement shoots for $131 million in savings over the next three years
Jeff Berman, Group News Editor -- Logistics Management, 6/8/2009
LOUISVILLE, Ky.—Staving off a potential scenario in which up to 300 pilots may have been furloughed, UPS and its pilots union—the Independent Pilots Association (IPA) said earlier today they have come to terms on cost-cutting measures totaling $131 million over the next three years.
This news follows reports in recent weeks that noted UPS has a $40 million cost savings goal for 2009, adding that UPS and the IPA inked a memorandum of understanding on April 9 to meet a June 8 deadline for a total of $131 million in savings, which includes savings of $38 million and $53 million in 2010 and 2011, respectively.
UPS officials said that through a series of voluntary steps, the IPA has identified nearly $90 million in savings to date. Even though this falls short of the three-year $131 million goal, UPS and the IPA said there will not be any pilot furloughs through April 1, 2010, adding that the IPA is working on producing additional savings.
A UPS statement indicated that voluntary pilot savings generated later this year could potentially eliminate any proposed layoffs. And it added 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.
“These steps were taken to actively manage our business throughout the economic downturn so that we remain strong,” said Patti Hobbs, UPS Airlines strategic communications manager. “One thing we needed to do was to make sure we were getting cost-savings from all areas, due to the volume reductions that had occurred.”
While UPS and the IPA are currently about $40 million short of the $131 million savings goal, Hobbs said both organizations are committed to meeting this objective. She went on to say this deal is an innovative agreement that averts pilot furloughs while also ensuring UPS remains competitive during the economic downturn. Of the 2,900 UPS IPA members, Hobbs said about 1,900—or two-thirds—stepped up to make a contribution to meet these savings objectives.
Aside from the savings identified by the IPA, Hobbs said the IPA plans to go back to their members in November and offer additional early retirement options. Early retirement was previously offered, but this time it will be offered to more pilots, she said.
"This is a remarkable achievement," said Bob Miller, IPA president, in a statement. "First of all I'd like to thank our pilots. None of this would have happened if they hadn't stepped up to volunteer from every fleet, seat and domicile. It shows tremendous solidarity and compassion for our fellow pilots. Second, I want to thank UPS. They didn't have to go down this road with us. We appreciate their openness to new ideas and their willingness to work with us in finding an alternative solution."
While the UPS and IPA are pleased with today’s news, an industry source whom declined to be identified, told LM that the original furlough notice UPS sent to the IPA contained an ultimatum of saving the company $54 million or face a ten percent pay cut.
“When the negotiations to find methods of saving these jobs were started, the company simply wanted concessions,” said the source. “When our union found incentives to [UPS pilots] who could help save these jobs the ability to do it, then suddenly the number grew to a staggering $131 million over three years.”
Regardless of the final number for proposed savings, it was clear that after UPS retired its entire fleet of DC8 aircraft on April 23 it created a situation where it was going to have to either get concessions from pilots on work rules or lay off pilots, according to Jerry Hempstead, principal of Orlando-based Hempstead Consulting.
“It’s better to have a job with less pay in this tough economic time, just like the rest of the working public than no jobs at all,” said Hempstead. “Keep in mind that DHL exited the domestic market, which has resulted in pilots being let go, and FedEx is suffering down volumes and deteriorating margins as well. The pilots have done the right thing and perhaps will be asked to do more in the not too distant future if the economy does not start restoring packages into the network.”
View All On-Demand Webcasts
