American Airlines management seems ready to give its pilots a new contract, though I’m surprised (and impressed) by the way the airline is going about it…
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American Airlines’ contract negotiations with pilots
At the moment we’re seeing pilots at most major US airlines trying to negotiate new contracts. They didn’t have much leverage to negotiate during the first two years of the pandemic, and with pilots now being in such high demand, this is obviously a great time to try to get a new contract.
We’ve seen pilots at both Alaska Airlines and Delta Air Lines negotiate new contracts, and pilots at other airlines are currently trying to do the same. American Airlines pilots have been trying to negotiate a new contract since before the pandemic, but so far haven’t been able to come to an agreement.
One of the challenges with these contract negotiations is that pilots at each airline want an industry leading contract. So not only is there a lot of benchmarking happening between airlines, but some contracts even contain provisions that there could be further retroactive pay increases in case a competitor negotiates a better contract.
Obviously this is challenging, and creates a situation where the sky seems to be the limit when it comes to pay. We’re seeing the latest example of that at American now…
American Airlines’ unconventional offer to pilots
Generally contract negotiations happen behind closed doors, and occur between management and top union officials. American Airlines CEO Robert Isom is currently taking an unconventional approach, and has just sent a letter to pilots, with what essentially amounts to a contract offer, as first flagged by @xJonNYC.
This letter is so unusual and frankly generous that many wondered if it was fake, but nope, this is real. Let me hit on a few of the highlights:
- Isom confirms that Delta pilots ratified a new contract “that is unprecedented in the history of collective bargaining,” and it’s “a deal that profoundly changes the economics of a Delta pilot’s career”
- Isom confirms his commitment that pilots at American “will be paid competitively,” and that “American is prepared to match Delta pay rates and provide American’s pilots with the same profit-sharing formula as Delta’s pilots”
- American pilots would receive pay increases of 21% in the first year, plus they’d get a better profit-sharing program, plus they’d get a bump in their 401(k) in the second year of the deal
- The profit sharing pool would increase from the 5% of pre-tax earnings that it currently is, to 10% of pre-tax earnings, to 20% of pre-tax earnings above $2.5 billion
- Compensation would increase 40% by the fourth year of the deal, and factoring in overall compensation, narrow body captains would earn $475,000 ($135,000 more than now) while wide body captains would earn $590,000 ($170,000 more than now)
- Isom finishes by saying that this contract is what American pilots deserve, and that it can be negotiated quickly, so he says “let’s get this deal done”
My thoughts on American’s offer to pilots
Usually it’s common to see airline management drag their feet when it comes to contract negotiations. So Isom offering what’s unarguably a compelling contract to pilots might come as a surprise. My guess is that he’s just trying rip the band aid off, and make sure the summer travel season runs smoothly:
- Isom probably realizes American is going to have to match the Delta contract, so he might as well get some goodwill out of it, and avoid travel disruptions
- These contracts often include retroactive pay raises as well, so there’s not really a benefit to drawing out the negotiations and waiting as long as possible to have a new contract ratified
Congrats to American pilots on being offered this contract, and hopefully they can come to an agreement soon.
I do think it’s worth briefly discussing the overall implications of these contracts. Ultimately pilots should of course negotiate as much pay as they can, but I think it’s worth acknowledging that to most Americans, these are some pretty jaw-dropping compensation structures. In fairness, keep in mind that the above numbers are for experienced captains, while newer captains and first officers would be paid less. However:
- There’s no denying that with such high labor costs, airfare will continue to have to increase over time, to reflect this kind of pay
- In particular, these kinds of pay structures make ultra long haul flights even more challenging economically, as these flights have four pilots; American seems to have almost given up on ultra long haul flying, but if United negotiates a similar contract, that’s going to be a challenge, given how many ultra long haul routes the airline operates
- While I understand becoming a pilot requires a big investment of time and money, it seems that pilots are getting a fantastic contract here, while flight attendants and other labor groups continue to not have a reasonable new contract; unfortunately this likely just reflects supply and demand, as there’s a never-ending number of people who are willing to becoming flight attendants for the current pay, while there’s a shortage of pilots
- Generally once pay increases, it’s rarely decreased again, aside from bankruptcy, or a situation along those lines; so if this just becomes the new pay standard of what pilots are “worth,” it’s going to be interesting to see how that impacts supply in the profession over the coming years
Bottom line
American Airlines CEO Robert Isom is taking contract negotiations into his own hands, and has written a letter to pilots offering a very generous new contract. This matches Delta’s recently ratified contract, and will see pilots getting roughly 40% increases in their compensation. Not only would pilots get more hourly pay, but their profit sharing would increase, and there would be quality of life improvements as well.
Isom is promising that wide body captains would be making $590K per year, so suffice it to say that this is some incredible pay.
Congrats to pilots on these huge pay bumps. One has to wonder how sustainable this is, though, especially when economic conditions change.
What do you make of this offer to American Airlines pilots?
You guys writing these comments know nothing of the industry.
You have no clue as to what it takes to be a senior wide body captain that will be making your click bait pay rates. As one who just retired from that position I can tell you that this offer from Isom falls short in many ways.
Pay, while good, doesn’t match inflation and doesn’t make up for the concessions pilots made after 9/11.
Quality of life issues are not addressed and American pilots...
You have no clue as to what it takes to be a senior wide body captain that will be making your click bait pay rates. As one who just retired from that position I can tell you that this offer from Isom falls short in many ways.
Pay, while good, doesn’t match inflation and doesn’t make up for the concessions pilots made after 9/11.
Quality of life issues are not addressed and American pilots will still lag far behind other carriers.
Isom needs to actually come to the table and negotiate with the union. Money (and QOL) talk and bullshite walks. Isom, and Parker’s before him, have never followed through on their promises. This is more of the same.
First of all American Airlines has NOT offered huge new contract to their pilots, just a hopeful video that their professional pilots will get them through one more Summer. Second, for all the people that say/think that “Pilots shouldn’t be paid the same or greater than doctors”. I have the utmost respect for doctors and believe their compensation has been stolen by big insurance and hospital administrators. That being said pilots have to get it...
First of all American Airlines has NOT offered huge new contract to their pilots, just a hopeful video that their professional pilots will get them through one more Summer. Second, for all the people that say/think that “Pilots shouldn’t be paid the same or greater than doctors”. I have the utmost respect for doctors and believe their compensation has been stolen by big insurance and hospital administrators. That being said pilots have to get it right all the time!! If a doctor gets it wrong one person may suffer ill consequences. If a pilot (or 2 pilots for those who think 1 is enough) gets it wrong hundreds of people suffer the consequences. Pilot pay has been stagnant for decades, that’s why there is a pilot shortage and that’s why the airlines are finally having to pay for their greed…. 100% truth do your research on it
These pay raises still don't bring the pilots pay back to pre 9/11 pay rates pre-bankruptcy! So it really isn't fantastic pay, it doesn't even make us whole. And that's not to mention that our pensions were stolen from us...
Lot of comments suggesting "the planes fly themselves" and other similar notions suggesting the job is easy, and pilots are overpaid ? Here are a few things to consider:
It takes the average mainline pilot 10-20 years of professional flying to get there. Once "there" , takes another 10-20 years to reach the quoted top of the scale salaries. During this 20-40 year window, most of us flew in the military at great personal...
Lot of comments suggesting "the planes fly themselves" and other similar notions suggesting the job is easy, and pilots are overpaid ? Here are a few things to consider:
It takes the average mainline pilot 10-20 years of professional flying to get there. Once "there" , takes another 10-20 years to reach the quoted top of the scale salaries. During this 20-40 year window, most of us flew in the military at great personal risk, and family sacrifice, or many years at very low level pay risky civilian flying jobs. For many of us, a combination of both.
The planes do not fly themselves ! Cockpit automation, autopliot etc .... ensure the precision required to operate in today's crowded and complex airspace. Computers/AI are not anywhere close to replacing pilots. As soon as AI can think/creatively solve complex spatial and time problems, Manage/collaborate with people, see and feel atmospheric and aerodynamic conditions that may threaten the flight etc ... then you might have something ..... the job is a lot more than just flying the plane.
If you think you have what it takes to do it, then maybe it is for you. You could eventually be "there" 20-40 years .... To start you will need a lot of money, or willingness and commitment to take on a lot of debt, or join the military ! ... they are always looking for serious people ... a lot of willingness to study your butt off for years. Absolutely no drug use ! If you are one of those 1 in 100 persons, Congratulations ! You might make it by your 50s and become a 1% er.
Spot on Jack!! Although I did make it 1 month shy of my 50th birthday via 28 1/2 years of military service.
Sadly this is a expected outcome due to the super high inflation, product of the fiscal irresponsibility of the left leaning current administration (the left always thinks that money and resources come out of 'thin-air' AKA other ppl pockets). The final customer, us, will be the hardest hit with the inevitable raise in airfare.
As a former mid-management employee at American Airlines, lower management always got screwed for pay raises. Other Non-Union jobs were treated last for the crumbs let overs well. While I have tremendous respect for pilots, lets face it they always got the lion's share of pay and benefits, and the poor flight attendants were treated as step-children. Forget about the gate agents and reservations agents which get practically nothing.
This is a recipe for failure....
As a former mid-management employee at American Airlines, lower management always got screwed for pay raises. Other Non-Union jobs were treated last for the crumbs let overs well. While I have tremendous respect for pilots, lets face it they always got the lion's share of pay and benefits, and the poor flight attendants were treated as step-children. Forget about the gate agents and reservations agents which get practically nothing.
This is a recipe for failure. Just stating the obvious (to any non-pilot airline employee). The next generation of airline companies will eat the legacy airlines which now includes SouthWest.
Your mid level job was in support of front line people like pilots that create revenue for the company. It takes 3 weeks to be a flight attendant. It takes decades to be a 777 captain. Money goes to where the money is created.
These cost increases are minimal compared to the total cost of putting out a flight. And American has always had too many middle management employees that are just drains on the...
Your mid level job was in support of front line people like pilots that create revenue for the company. It takes 3 weeks to be a flight attendant. It takes decades to be a 777 captain. Money goes to where the money is created.
These cost increases are minimal compared to the total cost of putting out a flight. And American has always had too many middle management employees that are just drains on the operatiion. Flight Ops alone has way too many office drones that don’t really contribute anything.
All for a job which can literally be done by a computer. Seriosuly , one “pilot” and one security guard is all we need on each plane.
I can tell you have no idea how avionics and redundancy works.
Jerry you are obviously not an airline pilot and have no idea what it takes to operate these aircraft …. If you think it is so easy then go and get your pilots ratings and apply …. American Airlines is hiring !!!!
Oh you are impressed when Frank Lorenzo goes around the union and attempts to bust the union? You sir, are a douche.
The reason pilots are paid more than on doctors is the doctors pay is set by the government through Medicare reimbursement rates. Pilot pay is not set by the government. We just pay it when the bankruptcy, bailout, pension guarantees etc come into play. If bankruptcies required liquidation everyone involved would be more careful with their money rather than expecting to again get our money..so glad we gave them $50B.
PS Anyone up for a...
The reason pilots are paid more than on doctors is the doctors pay is set by the government through Medicare reimbursement rates. Pilot pay is not set by the government. We just pay it when the bankruptcy, bailout, pension guarantees etc come into play. If bankruptcies required liquidation everyone involved would be more careful with their money rather than expecting to again get our money..so glad we gave them $50B.
PS Anyone up for a relief surgeon if the operation is too long?
These morons don't have a clue what they are talking about - look up basic airline economics by Freen and get back with me
The minute the US economy cracks and corporate and leisure travelers pull back, airline executives will cry poor.
I suspect APFA will become even more bitter knowing a wide body captain is now a member of the one percent club.
Not sustainable! If you are a current AA employee, non pilot, get ready for a bankruptcy filing! Save your money because the company can only raise prices so far before people can no longer afford to go across the street!
Ha, sure It’s sustainable, the low pilot pay for so long was what was unsustainable. No one is going bankrupt anytime soon…. Finally making up for 2 decades of concessions, regional whipsawing and contractual games….. the airline managers spent that time making the career of being a pilot so unappealing that they dried their own pipeline up, This is them reaping what the sewed
Never trust a deal negotiated in the press. The details of how they structure his proposal will unlikely look as good as this "Headline" reads. Working conditions can and often have erased what initially sound like good ideas. Unions don't negotiate in the press and any real deal will be hammered out behind closed doors. Flashing these high pay rates in public do nothing to drive respect for the professionalism that exists behind the cockpit...
Never trust a deal negotiated in the press. The details of how they structure his proposal will unlikely look as good as this "Headline" reads. Working conditions can and often have erased what initially sound like good ideas. Unions don't negotiate in the press and any real deal will be hammered out behind closed doors. Flashing these high pay rates in public do nothing to drive respect for the professionalism that exists behind the cockpit door, but instead end up being a failed attempt to screem to the public "but we offered them so much". I don't believe it.
You make the classic error here of seeing good pay rates, and calling it a good contact offer. Pay rates are one small section of the contract, and, quite frankly, not the section that needs the most work. We won't know if it's a good contact offer until the company and the negotiating committee of the APA reach actual agreements on quality of life improvements, which is where the AA contact truly lags the competition....
You make the classic error here of seeing good pay rates, and calling it a good contact offer. Pay rates are one small section of the contract, and, quite frankly, not the section that needs the most work. We won't know if it's a good contact offer until the company and the negotiating committee of the APA reach actual agreements on quality of life improvements, which is where the AA contact truly lags the competition. There's nothing impressive about negotiating in public, but the public falls for it every time.
Exactly right. When companies try to make an end run around the unions by offering it directly to the members, it's rarely a good deal. Negotiations in public are never a good idea.
I would say this is 4D chess by AA to force themselves into bankruptcy so they can dump all their contracts. But we know they aren't that smart.
"There’s no denying that with such high labor costs, airfare will continue to have to increase over time, to reflect this kind of pay" - Ben Schlappig.
For-profit companies charge whatever the market will bear, regardless of their costs.
The higher compensation probably will lead to more people wanting to be pilots; at this point it's more than most doctors, lawyers, and tech workers make. I guess it's a net good, if it prevents a long-term pilot shortage and the attending safety consequences that could follow.
Precisely put, the reason they are in this position is because for twenty years airline management made the career so unappealing by multiple bankruptcy concessionary contracts, the regional outsourcing game…… this is just the market readjusting itself, nothing more.
All this proves is how game changing the Delta pilot contract was in putting pressure on the rest of the big 4 to settle their pilot contracts. AS, B6 and NK's new pilot contracts which were settled fairly quickly were to slow the bleeding of pilots to the big 4 but DL's new contract not only increased the value of the contracts substantially but also gave Delta a considerable competitive head start in not losing...
All this proves is how game changing the Delta pilot contract was in putting pressure on the rest of the big 4 to settle their pilot contracts. AS, B6 and NK's new pilot contracts which were settled fairly quickly were to slow the bleeding of pilots to the big 4 but DL's new contract not only increased the value of the contracts substantially but also gave Delta a considerable competitive head start in not losing new candidates to Delta.
As for the comments about AA's financial situation, anyone that actually reads financials knows that AA reported one of its best quarters in a decade in the 4th quarter - in line with Delta and United while Southwest lost money and is expected to do so again this quarter. AA is aggressively paying down debt and spending less on new aircraft than any of the big 4 has for years - they can do that because they have such a young fleet.
AA's interest expenses in 2022 were only about 10% higher than United's and United's debt and interest expense will soar as it takes on far more aircraft in one year than any airline ever has - far above the cash it can generate.
AA is in a far better position to match DL's pilot contract than UA or Southwest.
And, since DL has also raised salaries for most other employees, they have bitten the bullet on pay increases while AA has mostly just its pilots and FAs to settle with - a far better situation than UA or WN.
Isom wants a deal; AA pilot leaders have to decide if they want to play games and drag the process out or get a deal done. No deal is ever 100% what anyone wants but DL's deal is very rich and AA is willing to open its wallet to get a deal done now.
@Tim - Completely agree. The Delta contract was not just great for their pilots but for AA, UA and WN pilots. A rising tide lifts all ships.
History has shown that airlines who peg their cost structure to the apex of revenue live to regret it within a decade. We are seeing the seeds of the next reset being sown here - the only question is how long until it happens.
And the last decade shows, airlines goes bankrupt, reneged bad deals, and get bailed out by taxpayers. All with a golden parachute for every CEO.
The big 4 are gaining pilots at the expense of regionals and low cost carriers. the big 4 are not the vulnerable carriers; they are in a better position relative to the rest of the industry than they have been in 45 years of deregulation.
@Tim Dunn - apex costs are not sustainable. There will be a downturn, and when that downturn happens those apex costs will need to be reset. It's the circle of life. It can be avoided by linking costs to market dynamics, but there is too much mistrust between Management and Union to come up with something like that right now.
The problem with your comment is that the workers at airlines are AlWAYS the last at the table to enjoy the good times, yet they are the first ones to experience the down times. So the only way is to hit them hard in the good times.
Does anyone seriously want a pilot who was hired under the philosophy "cheapest bid gets the job"?
Absolutely! That is what happens when I go to the ER. Forgot to mention that the plane pretty much flies itself and most accidents are caused by pilots..... I know its tough being a pilot, being away from your family 12 days a month, I mean they deserve probably even more money so they can start their side businesses faster. Finally, they act like the amount of hours to be a pilot is some absurd...
Absolutely! That is what happens when I go to the ER. Forgot to mention that the plane pretty much flies itself and most accidents are caused by pilots..... I know its tough being a pilot, being away from your family 12 days a month, I mean they deserve probably even more money so they can start their side businesses faster. Finally, they act like the amount of hours to be a pilot is some absurd high number compared the amount of studying it takes for other professions. Pretty sure the amount of time to being a social worker is about the same.
Best comment ever lol
Sidestepping the union to directly negotiate with the pilots isn't a good look.
I regularly talk with flight crews. Some are in the union hierarchy, typically low or mid-level. Most express that their union is doing nothing substantive for them. Even those in the union hierarchy. "In what way are our working conditions and compensation better than non-union airlines? They aren't." It's a simple question and a simple answer. Frustrated, some would welcome a direct offer from the employer.
How does a pilot make more money than a doctor? The US is such a weird labor market.
You have two options to find out.
On your next flight instead of turning right....turn left and ask the pilots directly.
Second option.....fork over a ridiculous amount of money and turn up your sacrifice to 11..... Learn how to fly and become professional pilot. And then you might find out.
Dude, not only your arrogance but your ignorance is showing, too. You are talking as if medical education doesn’t cost money and sacrifice. A surgery resident still has to be operate on a patient at the end of an 24 hr shift if there is an emergency. Enjoy your ignorance.
I don't think that makes the US unique. That is likely the same in the UK and other areas of the world.
Really? "Here. Take this shot. It's safe and effective......that'll be $450 please."
Don't worry guys our government promised us the inflation is transitory.
Supply and demand, the same reason we all make what we make.
This was the inevitable result of the 1500 hour rule change.
So yes, this is the government creating inflation.
AA has the worst financials among the big 3. What could go wrong?