American Pilots Approve New Contract With Huge Pay Raises

At the moment we’re seeing pilots at most major US airlines negotiating 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.

Back in October 2022, Alaska Airlines became the first major US airline where pilots ratified a new contract. In March 2023, Delta Air Lines pilots ratified a new contract, which set a new standard for the industry. Well, a third major airline has now ratified a new contract, as American Airlines pilots have today officially approved their new agreement.

American pilots approve new contract worth $9.6 billion

The Allied Pilots Association (APA), which represents the roughly 15,000 pilots at American Airlines, has today announced that members have voted to ratify a tentative agreement that the union leadership and management agreed to on August 1, 2023.

95% of eligible pilots participated in the ratification vote, and pilots ratified the new agreement by a margin of 72.7%. This new contract is worth an incremental $9.6 billion in value over the course of four years, so that’s huge.

Here’s what Captain Ed Sicher, President of the APA, had to say about the new contract:

“The pilots of American Airlines have spoken: It’s time to move forward with a new working agreement that provides substantial monetary gains and quality-of-life improvements. This contract is a big first step toward restoring the wages, benefits, and work rules that were lost during the past two decades while our profession was under continuous assault. As pilots, we hold a tremendous amount of responsibility with every flight we take. It’s a responsibility we take seriously, as evidenced by the U.S. airline industry’s unrivaled safety record, and it’s time for our profession to provide rewards commensurate with its unique demands.”

It has been quite a long road for American to get here. In May 2023, union leadership and management actually reached an agreement in principle on a new collective bargaining agreement. This followed pilots having voted to authorize a strike a couple of weeks prior to that.

However, the contract was then in jeopardy, when United’s pilots managed to negotiate a better agreement in principle. So American management has since sweetened the pot.

Details of the new American Airlines pilot contract

As mentioned above, the new contract for American Airlines pilots is worth $9.6 billion in incremental value over four years. Here are some of the highlights:

• This includes an immediate $1.1 billion one-time payment and ratification bonus
• On average, pilots will see an immediate pay raise of 21%, and combined with increases in 401(k) contributions and subsequent pay raises each May, pilot compensation rates rise by more than 46% during the contract’s duration
• Qualify-of-life improvements represent nearly 20% of the increased value of the contract, including enhancements to vacation benefits, increases in training pay, and per diem
• The new contract will become amendable on August 1, 2027, with a provision for the next round of bargaining to start as soon as November 2026

For those curious, you can find the new American Airlines pilot pay scale here (you’ll see lots of planes listed that American doesn’t actually fly, but that’s pretty standard — no, American isn’t acquiring any A380s). Unsurprisingly, the new pay almost exactly matches Delta’s updated pay.

For example, below is the captain and first officer pay scale for when the contract takes effect.

Meanwhile below is the captain and first officer pay scale for 2027, which is when the contract becomes amendable.

I’ve written in the past about how airline pilots are paid. If you want a rough estimate as to how much annual pay this translates to, just multiply the hourly pay by 1,000. Most pilots will fly just under 1,000 hours per year, but then also have other opportunities to get paid extra, ranging from per diem, to picking up extra trips with bonus pay, to profit sharing, etc. So if a pilot gets paid $300 per hour, you can expect that they’re probably making well over $300K per year.

As you can see, with this contract, senior narrow body captains will make around $340K per year, while senior wide body captains will make around $420K per year. Those amounts will significantly increase over the course of the contract, to closer to $400K per year for senior narrow body captains, and $500K per year for senior wide body captains.

That doesn’t include any profit sharing, though we’re talking about American here, so there might not be much in the way of profits to share.

What this contract means for American Airlines

A new contract like this is going to have some major implications. American’s new pilot contract offers $9.6 billion in incremental value over a four year period. This is significantly more than the company’s net profits over the four year period from 2016 to 2019, which were the four most profitable consecutive years in the history of the industry.

Given the razor thin profit margins in the airline industry, one has to wonder how sustainable these pay increases are. Not because pilots aren’t skilled and professional, but rather because they don’t exactly work in the highest margin or most profitable industry.

Bottom line

American Airlines pilots have just ratified a new contract. The four year contract offers $9.6 billion in incremental value, and includes pay increases of up to 46% through 2027.

This is a great new contract for pilots, and it’s going to be costly for the airline. I guess airlines have to hope that airfare and demand just keep going up, or else they might have a hard time paying these wages while turning a profit.

What do you make of this new contract for American pilots?