United Airlines pilots, after a five-year-long quest, have successfully ratified a new contract worth more than $10 billion. The deal, which received 82% support from union members, is a significant achievement for pilots. Let’s take a closer look at what it means.
The deal in numbers:
- Big immediate pay increases: Pilots are set to receive an immediate raise of between 13.8% to 18.7%. This rate varies based on the aircraft type – 14.1% for the 777 and 787, while the 737-700 and A319 pilots will benefit from the highest increment of 18.7%.
- Future pay rises: Pilots can anticipate additional raises of 5% in 2024, 4% in 2025, 4% in 2026, and 3% in 2027.
- Profit sharing: Aligning with Delta pilot’s pay arrangements, United’s pilots will receive 10% of profits up to $2.5 billion and a substantial 20% of profits exceeding this figure.
- Recapture of lost pay: The contract also addresses the financial setbacks due to recent turbulent years, committing $1.2 billion to compensate for lost pay. This entails 4% of 2020 earnings, 4% of 2021 earnings, 14% of 2022 earnings, and 14% of earnings from January 2023 through to the signing date.
For those interested in delving into the intricate details of the contract, a dedicated website and a summary document have been made available. The tables below outline hourly pay rates for captains and first officers by airplane. Keep in mind that United doesn’t fly the A380, A350, or A330, so you can ignore the first three rows.
This is a big deal: the new contract essentially guarantees United pilots up to 40% higher salaries over the next four years.
The question here is exactly how United plans to pay for everything. Its margins are already razor-thin–around 2%–and, as Ben over at OMAAT points out, this contract is worth more than all the profits United earned in its four most lucrative years (2016-2019) combined.
With this new contract, United will need to proceed carefully to ensure profitability and keep its stakeholders happy. Matching Delta pilot’s high pay without matching Delta’s high fares seems like a financial nonstarter, but maybe I’m missing something.