Rival airlines United Airlines (UAL.O) and American Airlines (AAL.O) may offer pilots similar pay increases after Delta Air Lines (DAL.N) offered them a 34% cumulative pay rise over the course of a new four-year contract.
Aviators in the United States and America told Reporters that the Atlanta-based carrier had “raised the bar” with a “really robust” proposal, even though Delta’s offer still needs to be permitted by union leaders and then backed by its pilots.
An American pilot proclaimed that this will serve as the bar of standard.
In addition, Delta’s offer includes a flat sum payment, lower health insurance costs, and upgrades to holiday pay, vacation time, business 401(k) contributions, and work policies.
Its union stated the proposed agreement would result in value increases of more than $7.2 billion over the following four years.
An “industry-leading” contract has been promised to their pilots by both the United States and America. Any proposal that is perceived to be weaker than Delta’s will therefore probably not be accepted.
A pilot for the Chicago-based carrier indicated that United’s management has stated that they want to assess the market.
That will be the new market if this agreement is approved and implemented by the Delta membership.
The planned contract with Delta was hailed as a significant development and, according to the Allied Pilots Association, which comprises American Airlines pilots, would energise other ongoing labour negotiations.
The proposed 19% wage increase over two years, which would have priced the Texas-based carrier approximately $2 billion, was rejected by American pilots last month. Similar to this, United pilots declined an offer that includes higher overtime and training compensation in addition to cumulative wage increases of more than 14.5%.
Huge pay increases for pilots have some airline executives worried that they will increase fixed expenditures and make it more difficult to resolve their debt-ridden financial sheets.
Analysts at Jefferies stated Delta’s offer might result in a 450 basis point increase in non-fuel operational expenses in 2023 compared to 2019.
Strong travel need has made it possible for airlines like Delta to raise prices to reduce inflationary pressure. However, given how fiercely competitive the sector is, Colin Scarola, an analyst and researcher at CFRA, doesn’t really believe Delta will be capable of completely offsetting pay hikes with ticket costs.
But a contract with its pilots is anticipated to end any ambiguity around staffing, making it simpler for Delta to organise its timetables and use its resources. Analysts also believe the increased efficiency can lessen Delta’s financial strains.
The agreement demonstrates the negotiating strength pilots have as carriers hire more employees to handle the surge in travel demand.
For instance, America employed 2,000 pilots this fiscal year and plans to hire an additional 2,000 pilots in 2019. Similar to this, Southwest Airlines’ (LUV.N) goal for this year and next is to add 1,200 and 2,100 pilots, respectively.
According to Jefferies analysts, the US needs an additional 10,000 pilots. The predicted duration of this supply-demand imbalance is 2027.
Pilot and president of the Southwest Airlines Pilots Association Casey Murray asserted that Delta’s proposed agreement will give it an advantage in the race for a limited number of pilots.
Today’s market is a pilot, according to Murray. Pilots are free to select their destinations.
Airbus (AIR.PA), which reported 68 deliveries in November, renounced its prediction for aeroplane shipments in 2022 on Tuesday but kept its other financial expectations.
The largest aircraft manufacturer in the world stated in a statement that it does not anticipate 2022 deliveries to fall significantly short of the 700-unit original forecast, which is now unachievable.
On Friday it was announced that the aim was under revision after November shipments fell short of expectations.
The announcement, which was supposed to be made on December 8, was postponed by two days.