Nearly 200 senior pilots at UPS have accepted the company’s voluntary severance package, and regional passenger airline PSA Airlines is trying to recruit them to close a crew shortage.
The head count reduction at UPS Airlines is much more limited than one envisioned at rival FedEx Express, where management has acknowledged it has more than 700 excess pilots and on Friday urged flight crews to quit for the same type of offer at PSA Airlines, an American Airlines subsidiary that operates in the Eastern half of the United States.
UPS (NYSE: UPS) in late August offered early retirement to veteran pilots as part of an effort to reduce costs in the face of shrinking parcel volumes.
Brian Gaudet, a spokesman for the Independent Pilots Association (IPA), said 193 pilots at UPS took the buyout package. That’s about 25 more than UPS originally intended, according to reporting at the time that the company was looking to eliminate 167 positions.
PSA Airlines is offering UPS pilots a $250,000 signing bonus, years of credit for flying large aircraft in commercial service and a direct pathway to eventually fly for American Airlines. It is unclear how long the offer is good for. The same program for FedEx (NYSE: FDX) pilots is available through Dec. 1, according to a memo from FedEx’s head of flight operations telling pilots to seriously consider the job alternative.
Former UPS pilots who go to PSA Airlines would fly Bombardier CRJ 700 and CRJ 900 jets that carry about 65 to 75 people, depending on the configuration.
The PSA Airlines offer at UPS is only being made to pilots who accepted the severance deal and are exiting the company, not the entire cockpit workforce, said Gaudet.
“They basically reached out to UPS and said, ‘Hey, we know you got pilots coming out. Would you mind just letting them know we are hiring?’ So UPS is just providing that information to the pilots who have chosen to separate. It’s nothing they are pushing to the active pilot group,” he said.
The IPA represents about 3,200 pilots, after the recent departures, in collective bargaining with UPS. FedEx has about 5,800 pilots on its payroll.
UPS pilots are at the top of the industry pay scale. A captain who works 30 years at UPS has a career value of nearly $17 million compared to $14.4 million at FedEx and more than $14 million at American and United airlines, according to Kit Darby, a Peachtree City, Georgia, consultant who estimates the earnings potential of pilots. A 40-year captain at UPS can make $24 million in pay, benefits and retirement. A UPS captain flying a Boeing 747-8, the largest jet in the fleet, receives nearly $34,000 per month in pay, while a FedEx pilot flying a similar large aircraft makes $30,500.
UPS is adjusting its network and flight capacity in line with deteriorating market conditions.
During the third quarter, average daily air volume was down 15.8% year over year, executives said on a conference call with analysts. The integrated parcel logistics provider said direct-to-consumer daily volume declined 13.4% compared to last year, while B2B volume was down 9%, and customers continued to shift volumes out of air to lower-priced ground transport.
UPS said total international volume was down 6.6% versus the prior year, with export volumes declining 4.1% y/y. Asia export daily volume was down 8% and export volume on the China-U.S. trade lane, the company’s most profitable international market, was down 10.3%. International revenue fell 11% to $4.3 billion due to the decline in volume.
FedEx and UPS domestic flight utilization underperformed against seasonal comparisons for September, according to research by Morgan Stanley transportation analyst Ravi Shanker. FedEx’s flight count tumbled 9% month over month versus minus 7% on average and is down 11% year over year. UPS domestic flight activity fell 12%, double the normal September dip from August, and remains down 19% against 2022.
UPS, like FedEx, is in the process of retiring its fleet of aging MD-11 freighters and reducing main-deck capacity flown by its brown tails.
The lower parcel volumes at UPS are influenced by consumers spending more dollars on services and experiences than goods, as well as retailers pushing customers to return to stores rather than simply ordering products online, CEO Carol Tomé said on the third-quarter briefing.
“You see retailers offering buy online, pick up in store, where they hadn’t offered that before,” she said.
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