http://www.commercialappeal.com/mca/business/article/0,1426,MCA_440_4231636,00.html
FedEx and pilots go into mediation
Negotiations over health care costs and job security have not been fruitful
By Jane Roberts
Contact
November 13, 2005
FedEx Corp. and its pilots have begun their latest round of talks, this time
under the eye of the National Mediation Board, the independent federal
agency that steps in when railroad and airline negotiations are at an
impasse.
While industry watchers have no idea how long the talks will last, they say
mediation is positive because it means both sides are still talking.
"They call these people mediators; they are really magicians trained to find
holes where no one else could," said Michael Boyd, aviation consultant at
The Boyd Group.
The mediator assigned to the FedEx case is John Livingood, whose most recent
assignment has been finding common ground between UPS and its pilots. The
sides have been in mediation since summer of 2004.
FedEx expects a long session because the pilots' union has already rejected
two offers without taking them to the membership for a vote.
"The NMB process is not short," said FedEx spokeswoman Kristin Krause. "It
takes months; it can take years. We hope their experienced hand can help the
process."
At the top of the agenda are health care and job security, sticking points
for the pilots since negotiations began 20 months ago.
Because FedEx is expanding dramatically, it is leasing planes and pilots to
cover the load, and paying the union penalties for the lost work.
To date, FedEx says it owes the union $2 million -- on top of the $300,000
it has already paid -- because it began leasing planes earlier this year and
will have to continue beyond the four-month lease period allowed in the
contract.
The pilots want restrictions on leasing to preserve their jobs.
FedEx so far has refused, saying "exotic formulas" would inhibit its ability
to grow" and would reduce its flexibility in an "ever-changing environment."
On the the health care side, FedEx says the pilots have not had "significant
premium increases" since 1998 while other employees have shelled out more
nearly every year.
The company says it will pay $4 out of the $5 spent on pilot health care
instead of the roughly 90 percent it's paying now.
For rationale, it cites corporate records showing employees who pay a higher
percentage of their health care costs tend to manage their health
expenditures better.
"If you pay next to nothing for health care, your concern for saving money
in that area is small," according to an internal company memo sent to the
pilots last week.
It is inconceivable to Dave Webb, chairman of the FedEx unit of the Air Line
Pilots Association, "that a corporation with a subsidiary as profitable as
FedEx Express would go to war with some of its most loyal and dedicated
employees over issues like this in light of its profitability.
"We are more than willing to address their issues if they show some
commitment to address ours."
The pilots have been conducting informational pickets at FedEx and Kinko's
locations since spring, including a 12-city blitz last Friday, to show their
frustration.
"Instead of legitimately negotiating with the pilots, FedEx management has
chosen to request the NMB's assistance and bring us closer to a potential
confrontation," Webb said.
The pilots have been working without a new contract for more than a year.
Federal law prohibits a strike as long as mediation continues.
FedEx made its first offer in late April, offering $500 million in raises
and signing bonuses commensurate with contract length if the pilots would
stop negotiating and accept the terms of their last contract, negotiated in
1998.
In late September, it made its second offer, including $100 million in
signing bonuses and 15 percent in raises over the life of the 41/2 -year
contract.
"We addressed the concerns they brought to the table after the first
contract," Krause said. "There were some changes in health care and their
pension, which is still, bar none, one of the best in the aviation industry
and any industry, for that matter."
The second offer, according to Webb, included $53 million in health care
concessions -- a 400 percent increase in out-of-pocket medical expenses --
and "other onerous grabs."
Saying "unity has never been higher," the pilots are determined that the
company negotiate instead of dictate, Webb said.
"We've lowered our expectation off of the opener considerably in order to
get a deal."
Meanwhile, the pilot compensation climate has changed dramatically.
Pilots at Northwest Airlines have agreed to temporary cuts worth $332
million a year on top of the $265 million they gave back late last year.
And it is now also increasingly likely that Northwest and Delta Air Lines
pension plans will be converted to defined contribution plans, freezing
pension benefits at current levels.
Pensions at United Airlines and US Airways were terminated entirely, costing
mid-career pilots tens of thousands in benefits a year.
The concessions on the passenger side have the effect of making the FedEx
offer look more favorable, says Mark Kiefer, aviation consultant at CRA
International.
"The company might want to take advantage of that and make a less generous
offer."
With jet fuel over $2 a gallon, Boyd doubts FedEx "is in a conciliatory
mood."
"In this day and age, most labor unions recognize the challenge, and most
want to be part of the solution instead of walking a cold picket line."
--Jane Roberts: 529-2512
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