(news article) UPS, pilots wary as mediation set to end

[leftseat10]

Here's the story:

http://biz.yahoo.com/rb/050526/transport_ups_pilots.html?.v=3

Reuters
UPS, pilots wary as mediation set to end
Thursday May 26, 4:30 am ET


SAN FRANCISCO (Reuters) - United Parcel Service Inc. and its pilots union are unlikely to resolve their 31-month-old contract dispute during a round of federally supervised mediation scheduled to conclude on Thursday, both parties said on Wednesday.

UPS spokesman Norman Black said the world's largest package delivery company would ask federal mediator Linda Puchala to schedule additional negotiating sessions as soon as possible. "We believe the mediator will do that," he said. "We have made progress at the table."

A spokesman for the union representing 2,500 UPS pilots said the union was disappointed with latest round of negotiations which have taken place over the past two weeks in Baltimore, Maryland.

While some ominous signs have emerged from the dispute -- such as this month's vote by the Independent Pilots Association demonstrating near-unanimous support for a strike -- both sides are bound to keep talking under a U.S. labor law that covers rail and air carriers.

Only if the National Mediation Board determines that talks have stalled, and asks both sides to enter mandatory arbitration, could the dispute head toward either a strike or management lock-out -- an outcome that could risk a serious disruption to the U.S. economy.

If either side were to reject arbitration, a 30-day "cooling-off period" would go into effect before a work stoppage became a possibility. Even then, the Bush administration could extend the imposed truce.

"It would be very dangerous for the national economy if a company that handles roughly 6 percent of the world's GDP stopped carrying packages," said Jim Corridore, an analyst with Standard & Poor's. Corridore said he expects the two sides to resolve the dispute without a work stoppage.

According to the union, there are five major issues in dispute: scheduling, pay, healthcare, pensions and "scope" -- a contract clause that governs when UPS can use non-company-owned planes.

UPS says its pilots are among the best-paid in the aviation industry with an average salary of $175,830. The company said it has offered to increase pilots' pay, though it has not said by how much.

Brian Gaudet, a spokesman for the pilots' union, said the pilots' average pay is around $168,000. He said the pilots are seeking increases in line with "market rates."

The pilots are also seeking increases in pensions as well as medical benefits coverage during the "bridge" period between the mandatory retirement age for a pilot, 60, and when federal benefits kick in. He added that he union is pleased with the progress the two sides have made on the scheduling issue.

The UPS spokesman declined to comment on the company's proposals for pensions and medical benefits.

While U.S. passenger airlines have been hurt by high fuel prices and competition from new entrants, cargo carriers UPS and FedEx Corp. have fared better. Both saw profits surge last year, with UPS's net income growing 15 percent in 2004 to $3.3 billion.

Though at an earlier stage, FedEx and its pilots, represented by the Air Line Pilots Association, are involved in contract negotiations of their own.

UPS and the Independent Pilots Association entered negotiations for a new contract in October 2002, and began federally-supervised mediation in August 2004.

Labor disputes have been costly to UPS in the past, as when a strike by the Teamsters union eight years ago cost the company as much as 6 percent of its normal daily volume. Black said UPS has yet to see any signs of its customers preparing alternative arrangements to deliver packages. "Our customers understand the process here," he said. Corridore, the Standard & Poor's analyst, said investors should not be concerned, for now. "If there was a perceived risk of a strike there would always be package divergence," he said. "Any time you expose your customers to your competition, there's a risk that some of those customers are not going to come back."

 

[V1andgo]

Is it realistic to count on a great new contract for the UPS guys and grils in the current state of the industry?
Wages are steadily reduced, pension are cancled, and the ACMI competition is ever increasing.

 

[Big Beer Belly]

Is it realistic to count on a great new contract for the UPS guys and grils in the current state of the industry?

Let's see ... current state of the freight industry is RECORD PROFITS ($3.5 BILLION for UPS alone) ... FedEx posting very strong numbers .... both managements receiving pay increases (UPS low-mid level pilot managers rec''d from $50,000 - $100,000 in stock BONUSES! on top of their $200,000+ salary) ... but hey, it's time for the hourly worker bees to sacrifice. This is typical of UPS ... fatten management's pockets while squeezing the lowly hourly workers.

UPS is headed for a STRIKE! Huge amounts of VERY profitable air volume will be permanently diverted to FedEx and DHL. Look for the stock to head into the 40's when a "release from mediation" occurs (triggering the 30-day cooling off period prior to the strike).

 

[skykid]

BBB,

Understand what you are saying, but I'm sure mgt is all over V1andgo's argument, whether it makes sense or not. I hope you guys can get a good contract without a strike.

 

[VaB]

Huge amounts of VERY profitable air volume will be permanently diverted to FedEx and DHL. Look for the stock to head into the 40's when a "release from mediation" occurs (triggering the 30-day cooling off period prior to the strike).

mmmm... you're getting me all tingly, BBB. Better kiss me if you're going to talk that way.

 

[michael707767]

UPS is headed for a STRIKE! Huge amounts of VERY profitable air volume will be permanently diverted to FedEx and DHL. Look for the stock to head into the 40's when a "release from mediation" occurs (triggering the 30-day cooling off period prior to the strike).

bad time to push the limits, IMHO. UPS has the money to weather a strike. They can also shift a lot of their cargo to ground transportation. Further, I bet there would be a lot of potential scabs who would love to get a job with UPS. After all, ALPA has already signaled that you can scab and all will be forgiven, right?

 

[Vprof]

that's until the Teamsters come to the rescue.

 

[V1andgo]

UPS and FedEx are the last remaining carriers that offer great pilot contract and a generous retirement plan. It is however questionable, if such compensation and benefit packages will stand the test of time.


In the past, the pax carriers set the benchmark for compensation and benefits. If I remember correctly, the unions of UPS and FedEx used the UAL, AA, and DAL contracts as a base to achieve their current contracts. But given the dramatic changes in the industry, is it not reasonable to believe contract negotiations at UPS and FedEx will be affected? If the benchmarks set by pax airlines helped in raising hourly wages and retirement benefits at the freight carriers, would the same logic hold true in reverse?

Although, freight companies do make boat loads of money. I seriously doubt that their executives are very eager to share these profits with their Pilots. With the airline industry in trouble and furloughed pilots all over the place, management will find willing and retain current employees, without increasing pay and/or benefits.

Additionally, the changes of the competitive environment in the freight industry will put further pressure on Pilot unions. One factor to consider is the aggressive move of DHL into the US market and their drive of global expansion. With DHL entering the US market and committing large amounts of resources to establish a ground operation, things are bound to change in the long-run. Domestically the future of freight appears to be on the ground and not in the air . The increased use of e-mail has stopped the growth of overnight express and may even cause this market sector to shrink. In fact, with the passage of the electronic signature bill in 1999 (if my memory serves me right), Banks, lawyers, mortgage companies, etc. conducted most of their business and legal documentation right over the net.

Apparently the future is in the large and ugly freight connected to Just-in-Time manufacturing and warehousing. Thus, the need of supply chain management and total logistical integration is increasing. Although the schedules are tight but with lead-times of 24 to 48 hours, a logistic operation such as FedEx Ground, UPS trucking, and the new DHL will be able to manage time versus cost in a manner that will increase ground transportation and reduce costs. Therefore, the domestic air operation will shrink in the long-term in comparison to less-costly transportation methods, such as truck and rail.

So, what can Brown do for you? Whatever it is that Brown does, the balk of it will be on the ground and involve logistic management, which is also the business sector for UPS and FedEx with the highest profit margins. These high margins may explain why DHL is putting so much effort into establishing a ground/logistic network. In my estimation, this is not the best bargaining position for any pilot union for negotiation.
Another aspect worth considering is the domestic use of ACMI. DHL is using two ACMI carriers in the domestic air freight sector to keep costs down. They simply play the A-Star guys against the ABX guys ---- steadily lowering the bar.

Will UPS and FedEx follow their example? Maybe someone could respond to the rumor that FedEx signed a long-term ACMI contract with Gemini for 6 DC10.

Some insist that a strong scope clause will prevent that from happening. But history shows it can be done. DHL did it despite a scope clause. They formed a holding company, split all operations into independent entities, sold and bought what they needed to operate a Ground ops., and then offered ACMI contracts to the independent airlines (ABX Air and A-Star). All legal and none of the Union contracts were able to prevent it. Besides all aspects that are the result of a negotiated contract can be renegotiated. (i.e. DAL, UAL, and USAirways with the 70-seater changes to their scope)

​

On the international front things are only slightly better. Due to the vast distances that freight has to travel, air cargo has a clear advantage in the equation of cost versus time. But, even in the international arena the torpedoes are in the water. DHL operates all its international air freight through ACMIs. Furthermore, Lufthansa and DHL are in the process to set up a company in China to operated MD11 with a chinese certificate. That does not give me the warm and fuzzy. The Chinese end-up with the funding and the logistical know-how to enter the US and European market as a low-costcarrier.


Leaving FedEx and UPS with no alternative but to reduce costs.

Additionally, Air Atlanta in Iceland and Air Bridge in Russia are expanding with 747's cheap labor ACMI capacity. And what about the threat of changing the rules on cabotage?

Thus my question, what does the future hold? The Pax carriers are flat broken on their a---- with no turn-around insight. Their great paying jobs are gone forever. Is freight the next victim of cost cutting and globalization, not to mention the threat of cabotage?

What do you think?

​

 

[Big Beer Belly]

What do you think?

​

[/font]

I think you haven't done your homework my friend. International small package is not only the growth of UPS but represents the lion's share of their profit. According to UPS's former CEO James Kelly, 1 domestic origin international package produces the same profit as 40 domestic ground packages (published circa '97, "Inside UPS"). 100,000 intl (read AIR!) packages equals 4 MILLION domestic (GROUND) packages! The rest of you analogy is so faulty it'd take me days to correct. Suffice to say, the future of UPS (and its increasing profits/increasing shareholder value) is tied to its airline, not its ground.

 

[TonyC]

When L.L.Bean starts e-mailing their clothing, I'll be concerned.










Does anybody know how much FedEx and UPS lowered their rates for shipping after September, 2001? I think you'll find the bulk of the answer to the passenger industry's problem in the answer to that question. They'll figure it out, eventually.





Let's see... which other topics should I touch on? hmmmm....


The International Brotherhood of Teamsters will honor a strike by the Independent Pilots Association, the union representing the pilots of UPS. Don't expect brown trucks to roll when brown airplanes stop.



Scope and ACMI - - a threat, and yet not a threat. FedEx uses contracts to handle surges in capacity need, and it is allowed by contract. We would prefer they have the flexibility than deal with furloughs that would be inevitable without it. However, restrictions are in place to prevent the abuse of the tool. Are they effective? Well, let's say we'd prefer the scope restrictions be tightened.

On the other hand, are we at risk of being completely replaced by ACMI contracts? If you remember back to the days of Federal Express's infancy, the unique aspect which was marketed and accepted that set us apart from all the rest was that we owned our own airline - - we were not dependent on the schedules and belly freight space of any other airline. FedEx Express still realizes today that the reliability achieved by the use of its own pilots and its own airplanes is unmatched. When it absolutely, positively has to be there, there's only one way, and it's very purple. Fred doesn't want a Gemini, he wants a FedEx Express. I'm not saying that to belittle Gemini - - they do a great job doing what they do. I'm just stating a reality.



V1andgo - - you have a bleak "outlook" on the future that leads to your conclusion that "FedEx and UPS [are left] with no alternative but to reduce costs." So...., which management team employs you?








.

 

[Mr Zog]

V1andGo,

WOW. Are you sure you aren't on FedEx's management negotiation team? First of all, if FedEx is having such a hard time being competitive in todays market, explain the following. Our CEO makes 10x more in compensation than the CEO at UPS. Our stock has more than doubled over the past 5 years, yet our company insists on instituting a dividend to our investors. Our negotiating committee knows exactly what each propsal will cost our company and how much they can afford and still be competitive. But FedEx has enjoyed record profits over the past five years, and you make it sound like we should take a pay cut.

The belief that Trucks will dominate the Domestic market. Yes the majority of freight moved in the US domestically is done by truck. But FedEx earns its money on "priority" freight. In todays market, time is money. To be competitive companies/corporations need "it" and they need "it" yesterday. Trucking it for 3 days is not an option for them.

The advent of e-mail. Does electronic documents take from our business? Probably yes. But let me ask you this question, how many things did you purchase "on-line" in 1999 compared to 2004? And multiply that by 300 million people in the US. And in the future, do you see more companies conducting operations on-line and using UPS and FedEx as their distribution networks? No need to answer, it was a rhetorical question.

Finally China. We have not even scratched the market in China or India. We are talking about a "domestic" network five times larger than the US.

There will always be competition, but that is not an excuse to pay employees minimal wages. Today, cost cuts are always associated with wages. That is the easy way, not the most effective way. Your whole arguement is based on that fact. The only way UPS and FedEX can be effective is cutting cost and more specifically employee wages. That is an archaic way of thinking. WE ARE NOT A COST, WE ARE A MEANS OF PROFIT.

 

[VaB]

And to add 2 more things to TonyC and Mr. Zog's thoughts.
FedEx has already:

A) Publicly stated that the FedEx pilots are a part of the reason that the company is profitable and that we deserve a raise. Don't bother telling me that it's just media manipulation because I know that, but they did say it.

B) They've already offered us a raise. A crappy one, but a raise none the less. That fact alone says that they know which direction they need to be headed.

See ya June 1. Hopefully.

 

[V1andgo]

Shipping Trends Favor Ground

Annual figures gathered by the Colography Group suggest a major shift in the national economy as domestic shipments moved from air to ground and air exports increased by almost a billion dollars in 2004.

The number of U.S. domestic ground parcel shipments rose to 3.94 billion in 2004, up from 3.73 billion in 2003, according to the Colography Group. The three major national parcel carriers battled over market share but all participated in the increases. FedEx Ground and DHL Express gained market share while UPS dipped slightly but remained the market leader.

Colography estimated total LTL shipments rose by approximately 5.4 million to 127.2 million. Revenue rose $2 billion to $20.09 billion. FedEx Freight, ABF Freight and the Con-Ways gained shipment share year-over-year. Yellow Roadway, the lone national carrier, lost shipment share year-over-year.

Colography predicts that FedEx Corp. this year will transport more domestic ground shipments than domestic air shipments for the first time. "This is a watershed event, but not an unexpected one," said Ted Scherck, President, The Colography Group. "The gap between FedEx's air and surface shipment mix has been narrowing for the past seven years, starting about the time FedEx acquired the parent of the former Roadway Package System and challenged UPS' dominance of the domestic ground parcel segment."

Domestic air shipments in general declined in 2004, totaling 2.45 billion. Although shipment count was down year-over-year, revenue increased to $31.84 billion. Colography analysts attribute this to the impact of fuel surcharge pass-throughs on carriers' revenue streams. The U.S. Postal Service held the largest shipment share, followed by FedEx Express, UPS Air and DHL. Due to fuel surcharge pass-throughs, revenue for the average overnight air shipment rose strongly in 2004, ending the year at $18.11. Revenue for the typical deferred air shipment also increased through 2004, ending the year at $9.19, according to Colography's statistics.

The big gainers in freight in 2004 were carriers of air exports. Shipment count went up to 85.5 million from 79.2 million in 2003. Revenue rose strongly to $8.4 billion from $7.5 billion in 2003.

Last time I ordered on-line, it was shipped UPS 2nd day ground for free. So what ---I wait a day. Internationally, the airplane rules no question. But, since lease rates, insurance and fuel, for the most part, are controlled by a few players, the costs are about the same across the playing field. So how do you compete? Labor costs and operational cost savings, what else is left?
I wish the UPS-air-drivers in their negotiationthe the very best.
The point, that I have a much too negative outlook at these things is well talken, sorry I did not want to offend.

 

[Big Beer Belly]

IPA Press Release regarding negotiations.

The following is the IPA Press Release issued today regarding negotiations.


Contact: Brian Gaudet
202/494-4332
[email protected]


UPS, once again, fails to reach Contract agreement with its Pilots
UPS came to Baltimore unprepared
NMB sets mid-June showdown in Washington, D.C.

Thru., May 26, 2005 (Baltimore) – UPS, once again, failed to meet a National Mediation Board deadline for wrapping-up contract negotiations with the Independent Pilots Association.

“Here we are, right before Memorial Day, coming out of two-weeks of talks in Baltimore and UPS has botched its second NMB deadline,” said Capt. Tom Nicholson, President, Independent Pilots Association. UPS missed the NMB’s first contract deadline when Federally mediated talks broke-down in Cincinnati just before Easter.

UPS was unable to meet the NMB’s latest contract deadline because it was wholly unprepared to close-out key areas of the contract. The best example of this was this week’s abbreviated discussion on pension.

“The IPA has spent three-years and more than a million dollars having our pilots and staff work with outside actuaries and Employment Retirement Income Security Act attorneys developing and modeling pension proposals. We came to the table this week ready to close a deal, but it became painfully obvious to both the IPA and the NMB that UPS hasn’t spent any time or resources preparing to work a deal on pension,” said Capt. Nicholson.

In order for UPS to get its proposals on pension and other open issues ready, the NMB has given the company two-weeks to prepare for the final round of negotiations at the NMB’s offices in Washington, D.C.

“While the Railway Labor Act process can sometimes be arcane, it does follow well established paths. When talks move to the NMB in Washington, D.C., most observers realize that it’s the end of the game and that status quo will change. We’re willing to follow the NMB’s lead and give UPS one more chance to do what it should have done during the seven-weeks between Cincinnati and Baltimore, which is to get its ducks in a row so that the Company returns to the table in mid-June with the data it needs to make a deal,” said Capt. Nicholson.

 

[BoilerUP]

Last time I ordered on-line it was shipped UPS ground for free. So what I wait a day.

Yes, but in business, time is money - you simply cannot afford to wait a day.

 

[Big Beer Belly]

FedEx has already:

A) Publicly stated that the FedEx pilots are a part of the reason that the company is profitable and that we deserve a raise. Don't bother telling me that it's just media manipulation because I know that, but they did say it.

B) They've already offered us a raise. A crappy one, but a raise none the less. That fact alone says that they know which direction they need to be headed.

From UPS's spokeshole Norm Black:

<< ...
"We have essentially resolved a number of very sticky issues and we are absolutely confident we will get a new contract for our pilots that rewards them with a pay raise while allowing the company to stay competitive," he said.

UPS shares fell 7 cents to $74.83 in afternoon trading on the New York Stock Exchange. >>

(They're going to fall a LOT further!)

 

[Wise Guy]

V1andGo,

Dude, you're online order wasn't sent for free. You paid for it in the price of the merchandise you bought.

It seems to me that you would have those record profits going into the pockets of management and not to those who make the profits possible. To me you sound a bit like a..............manager.

 

[FlyBoeingJets]

UPS and FedEx are the last remaining carriers that offer great pilot contract and a generous retirement plan. It is however questionable, if such compensation and benefit packages will stand the test of time.
Although, freight companies do make boat loads of money. I seriously doubt that their executives are very eager to share these profits with their Pilots. With the airline industry in trouble and furloughed pilots all over the place, management will find willing and retain current employees, without increasing pay and/or benefits.

Additionally, the changes of the competitive environment in the freight industry will put further pressure on Pilot unions. One factor to consider is the aggressive move of DHL into the US market and their drive of global expansion. With DHL entering the US market and committing large amounts of resources to establish a ground operation, things are bound to change in the long-run. Domestically the future of freight appears to be on the ground and not in the air . The increased use of e-mail has stopped the growth of overnight express and may even cause this market sector to shrink. In fact, with the passage of the electronic signature bill in 1999 (if my memory serves me right), Banks, lawyers, mortgage companies, etc. conducted most of their business and legal documentation right over the net.

So, what can Brown do for you? Whatever it is that Brown does, the balk of it will be on the ground and involve logistic management, which is also the business sector for UPS and FedEx with the highest profit margins. These high margins may explain why DHL is putting so much effort into establishing a ground/logistic network. In my estimation, this is not the best bargaining position for any pilot union for negotiation.
Another aspect worth considering is the domestic use of ACMI. DHL is using two ACMI carriers in the domestic air freight sector to keep costs down. They simply play the A-Star guys against the ABX guys ---- steadily lowering the bar.

Some insist that a strong scope clause will prevent that from happening. But history shows it can be done. DHL did it despite a scope clause. They formed a holding company, split all operations into independent entities, sold and bought what they needed to operate a Ground ops., and then offered ACMI contracts to the independent airlines (ABX Air and A-Star). All legal and none of the Union contracts were able to prevent it. Besides all aspects that are the result of a negotiated contract can be renegotiated. (i.e. DAL, UAL, and USAirways with the 70-seater changes to their scope)
​

On the international front things are only slightly better. Due to the vast distances that freight has to travel, air cargo has a clear advantage in the equation of cost versus time. But, even in the international arena the torpedoes are in the water. DHL operates all its international air freight through ACMIs. Furthermore, Lufthansa and DHL are in the process to set up a company in China to operated MD11 with a chinese certificate. That does not give me the warm and fuzzy. The Chinese end-up with the funding and the logistical know-how to enter the US and European market as a low-costcarrier.
Additionally, Air Atlanta in Iceland and Air Bridge in Russia are expanding with 747's cheap labor ACMI capacity. And what about the threat of changing the rules on cabotage?

Is freight the next victim of cost cutting and globalization, not to mention the threat of cabotage?

What do you think?
​

Definitely food for thought. No one thought CAL, NWA, DAL, AA and UAL would ALL have their panties in a bunch. There is no dominant legacy carrier anymore with 'industry leading' wages. We all just knew two or more of these powerhouses would continue and airline pilots would continue to be well paid as a group. Even if someone had to endure a BK and start over they would rise to the top again. But that is now gone for the next 5-10 years. LCC's are ruling and will fight each other until the one with the lowest wages and debt comes out on top. Our wages may never come back up. Management and BK laws are big reasons, but the biggest is the loss of revenue.

Can this happen to cargo? Not right now. A change in the status quo will take a long time. Longer than it did in the passenger industry. But it might just happen in ten years or so. My prediction, if it does change, is that the change will be less dramatic. Pay will be tied to revenue. The good news for cargo dogs is cargo will always create more revenue. Especially express cargo. Higher wages will always be easier to justify. That is unless package rates drop.

 

[pilotyip]

V1andgo, stop dealing in reality, this a pilot board.

 

[V1andgo]

V1andgo, stop dealing in reality, this a pilot board.
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