EXCLUSIVE: Delta offers pilots big pay increases as unions flex their bargaining power

CHICAGO (Reuters) – Delta Air Lines (DAL.N) has offered a 34% cumulative pay increase to pilots over three years in a new contract, demonstrating the bargaining power pilots have in an understaffed industry with a boom. Travel request.

If the deal is approved by Delta pilots, it is widely expected to serve as a benchmark for contract negotiations with competitors United Airlines (UAL.O) and American Airlines (AAL.O).

Delta pilots will earn at least 18% at the date the contract is signed, another 5% after one year, 4% after two years and 4% after three years, according to a draft contract seen by Reuters.

They will also receive a one-time payment equal to 22% of their cumulative earnings between 2020 and 2022 after the deal is ratified.

The Atlanta-based carrier’s pilots have been operating without a new contract for nearly three years after their old contract became modifiable in December 2019, to the frustration.

They voted overwhelmingly in October to allow the strike if negotiators could not reach an agreement on the new contract.

Escalating costs and higher prices

Huge wage increases are expected to exacerbate cost pressures on carriers just as concerns about a recession in the United States fuel concerns about consumer spending.

Although ticket sales remain strong, investors fear that travel demand will plummet, making it difficult for an indebted industry to repair its balance sheet. They fear carriers will have to borrow more money to fund operations.

However, the scramble among airlines to hire staff to take advantage of booming consumer demand has boosted pilots’ bargaining power. As the industry returns to profitability, pilots argue airlines can pay them more to cover the increasing cost of living.

Airlines have, so far, relied on strong demand and higher fares to ease inflationary pressure. Any increase in labor costs is expected to be passed on to customers through higher ticket prices.

In the draft agreement, Delta pledges that the pay rates of its pilots will exceed those of the United States and America by at least 1%.

In a memo to its members, the union representing Delta pilots said the deal represented more than $7.2 billion in cumulative value increments over the next four years.

Delta said it was “delighted to have reached agreement in principle on a new pilot contract, one that recognizes the contributions of our pilots to Delta’s success.”

In a year of protests in the industry, pilots at all major US airlines have demanded higher wages and a better work-life balance.

Hundreds of United pilots arrested outside Chicago’s O’Hare Airport on Thursday, demanding an “industry-leading” contract. Last month, they rejected an offer that included more than 14.5% cumulative pay increases, overtime pay and training.

American pilots also rejected a proposed 19% increase over two years that would have cost the Texas-based carrier nearly $2 billion.

Pilots also claim a better quality of life. They say staffing and operational issues at carriers drive up overtime, leaving them exhausted.

In its memo, the Delta pilot union said more than 25% of the contract agreement value is for quality-of-life-related clauses.

The proposed deal also provides for 10 weeks of paid maternity leave, two weeks of paid parental leave, and reduced health insurance premiums.

(Reporting: Rajesh Kumar Singh and David Shepardson). Edited by William Mallard

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