UPS, pilots agree on short-term contract extension

A jumbo jet takes off

UPS (NYSE: UPS) and the union representing its pilots reached a tentative agreement Monday on a two-year contract extension, giving the express carrier operational certainty as it competes against FedEx, DHL, Amazon and other logistics providers.

The short-term agreement includes annual wage increases and improved pension benefits, the Independent Pilots Association (IPA) and Atlanta-based UPS said. The Atlanta-based delivery and logistics company said the deal provides it greater predictability and operational flexibility to meet growing customer demand for global air services.

The contract covers 2,959 crewmembers, who must vote to ratify the deal by March 31. The IPA said contract specifics won’t be disclosed until the the proposal is presented to all UPS pilots. If approved, the contract would go into effect Sept. 1, 2021, when the current pact is scheduled to become amendable.

The last two UPS pilot contracts were for five years. The two-year extension is unique for the IPA, but not for the industry. United Airlines in 2016 reached a two-year contract extension with the Air Line Pilots Association (ALPA). FedEx pilots, also represented by ALPA, agreed to a short-term contract extension in 2011.

The U.S. airline industry is governed by the Railway Labor Act (RLA), which was extended to air transportation in the 1930s. It includes a number of provisions designed to protect the public from work stoppages.

One way the RLA is different from the National Labor Relations Act is that contracts do not have fixed expiration dates. Instead, they can be amended at agreed dates. The terms remain in effect until the parties unite on a new contract. Strikes and lockouts are forbidden until the parties have gone through a lengthy series of steps regulated by the National Mediation Board.

As part of the existing contract, UPS and the union agreed to start negotiating early and the two-year extension is the result.

“Our pilots do a great job flying for our customers, so we’re pleased to have come to an agreement with IPA leaders to extend the existing contract,” said UPS Airlines President Brendan Canavan in a statement.