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American Airlines has too many pilots
As you’d expect, at this point American Airlines has way more pilots than they need. They’re down to operating three long haul international routes, and beyond that are also greatly reducing domestic flying.
No one knows how long this reduced demand will last, and whether things will return to normal in weeks, months, and years. There’s the direct issue of coronavirus, and then of course there’s the lasting impacts it has on the economy.
Well, American Airlines has now worked out an agreement with their union to deal with the excess pilots. They’re the second US airline to do this, as United has also come to an agreement with pilots.
Ironically they could work this out in days, while management has been dragging their feet with negotiating an overall new contract with pilots (at the beginning of the year pilots said they were running out of patience, and had enough).
What is American Airlines offering pilots?
American and the Allied Pilots Association (APA), which represents American Airlines pilots, came to an agreement yesterday for pilots to accept a voluntary leave of absence.
As reported by the Dallas Business Journal, this agreement gives American’s roughly 14,000 pilots three options for voluntary leave, including:
- Voluntary Extended Leave of Absence — pilots can take an unpaid leave of absence that can last up to 12 months; pilots will still accrue length of service and receive benefits, but won’t accrue sick leave or vacation time
- Voluntary Short-Term Leave of Absence — pilots can take advantage of one month, three month, or six month options, during which they’ll be paid for 55 hours per month of flying; pilots will still accrue sick leave, vacation time, and seniority
- Voluntary Permanent Leave of Absence — pilots who are 62 or older can choose to essentially retire early, and they’ll be paid for 50 hours of flying per month until the mandatory retirement age of 65
Crunching the numbers on these opportunities
As you can see, for two of the three packages, pilots are still paid for 50-55 hours of flying per month. To give you a sense of how this works, airline pilots can fly up to 1,000 hours per year:
- That means pilots can work an average of just over 80 hours per month
- American Airlines guarantees pay for at least 73 hours of flying, even if pilots don’t actually fly that much
With the two paid leave opportunities, pilots would be looking at earning ~60-70% of their normal pay, not factoring in per diems, holiday pay, etc.
For example, at the very top of American’s pay scale, senior 777 and 787 captains earn $342 per hour (that’s according to Airline Pilot Central). With 73-80 block hours, pilots would ordinarily be earning ~$25K-27K for the month.
With these offers:
- If they were paid based on 50 hours of flying, they’d instead be earning ~$17K for the month
- If they were paid based on 55 hours of flying, they’d instead be earning ~$19K for the month
Let me once again emphasize that the above pay is only for senior captains, and less senior captains and first officers are earning significantly less.
This is potentially really generous, though I guess it depends on how you look at it:
- You’re getting 60-70% of your pay while taking time off
- At the same time, assuming not many pilots take advantage of this, I’d guess that very few pilots will be anywhere close to maxing out hours, and will get minimum pay while flying very little; this assumes American doesn’t introduce any involuntary furloughs
In particular I think the opportunity to retire early is especially generous, since you can 60% of your normal pay by just retiring. Then again, if you’re senior and Dallas based, two Dallas to Hong Kong trips per month more or less maxes out your hours.
Airlines are needing to reduce their staffing, not just in the short term, but also in the medium term. I think this really shows how dire the situation is. The real question is if enough people take advantage of this, or if they have to start offering involuntary furloughs.
The concept of paying someone for a couple of years when they retire might sound costly, though keep in mind it’s a win-win — if they need pilots, they can replace them with junior pilots on much lower pay scales, since pilots with a lot of seniority are being compensated especially well.