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UPS reduces planned number of pilot furloughs

By Jeff Berman, Group News Editor
August 24, 2010

Citing improving financial conditions, UPS said it is reducing the number of its planned pilot furloughs from 300 down to 230, according to an Associated Press report.

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 Independent Pilots Association (IPA), which represents pilots flying for UPS, 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 were to be furloughed in May.

Earlier this year, the IPA said that 54 pilots would be furloughed on May 23, and the AP report indicated that a total of 109 of the 230 scheduled furloughs had already occurred.

UPS officials told LM in an e-mail earlier this year that the furloughs were needed, because 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.

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.

“Our business model is pretty simple: packages equal jobs,” spokesman Norman Black said in a statement. “Our hope is that the economy improves to the point we can return more employees to work. We will continue to examine business conditions and adjust pilot staffing levels appropriately in the future.”

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.

Despite an uneven economy, UPS reported second quarter earnings—with quarterly revenue at $12.2 billion—was up 12.7 percent year-over-year, and operating profit—at $1.4 billion—was up 56.6 percent. Earnings per share—at $0.84—were up 71 percent.
UPS added that average volume per day of 14.8 million packages was up 3.4 percent, and consolidated quarterly volume of 948 million packages was up 4 percent, with consolidated revenue per piece—at $10.47—up 7.1 percent. Company officials said that these increases represent higher base rates, fuel surcharge increases, and heavier average shipment weight.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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