On May 19, 2023, after a very drawn out negotiation process, American Airlines and the Allied Pilots Association (APA) reached an agreement in principle on a new collective bargaining agreement. This follows pilots having voted to authorize a strike earlier this month.
We now have some more details about what exactly this contract contains, including the new pay rates for American Airlines pilots.
In this post:
American Airlines pilots voting on a new contract
American Airlines management and the union representing pilots have reached an agreement on a new contract. It will now be up to pilots to vote on the contract, in order to ratify it.
Here’s what the union had to say about this agreement:
The APA Negotiating Committee and its American Airlines management counterparts have reached an agreement in principle (AIP) on a new collective bargaining agreement.
As required by the APA Policy Manual Section 9.06, we will move forward with completing contractual language for all sections and related letters and for the implementation schedule. Once that requirement is fulfilled, the Negotiating Committee will present the AIP to the APA Board of Directors for consideration as a proposed tentative agreement (TA) at least seven days prior to any meeting convened to consider the TA.
Fellow pilots, thank you for your steadfast support throughout this lengthy process. As always, we will proceed with the best interests of the pilot group foremost in our minds.
Here’s what American Airlines management had to say about this agreement:
We’re pleased to have reached an agreement in principle on a new four-year contract with the Allied Pilots Association (APA) that provides our pilots with pay and profit sharing that match the top of the industry with improved quality-of-life provisions unique to American’s pilots. We have the best and most professional pilots in the business and like all American Airlines team members, they deserve to be paid well and competitively.
Details of the new American Airlines pilot contract
The APA has published a website with all the details of the new pilot contract, so we now have a lot more information. If approved, the contract would be amendable after four years. Here are some of the major improvements with the new contract:
- Pilots would get retroactive pay increases of 4% for 2020, 4% for 2021, 14% for 2022, and 21% for 2023
- Once the contract is ratified, pilots would immediately receive pay increases of 21%, then 5% pay increases in 2024, 4% pay increases in 2025, 4% pay increases in 2026, and 3% pay increases in 2027
- Pilots would also get profit sharing to the tune of 10% of pre-tax income up to $2.5 billion, and 20% of pre-tax income in excess of $2.5 billion
- There are all kinds of lifestyle and other pay improvements, which you can read more about here
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 certain trip pay, 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 would be making around $340K per year, while senior wide body captains would be making around $420K per year. Those amounts would 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
Pilots at most major airlines in the United States have been in the process of negotiating new contracts, given the pilot shortage, combined with the huge demand for travel. It’s a great time for pilots to try to secure a new contract. So far we’ve seen pilots at Alaska and Delta ratify new contracts, so it looks like pilots at American are next in line to finalize this.
Back in March, American CEO Robert Isom said the company was prepared to match Delta’s contract, and that pilots could be making up to $590K per year. The numbers more or less support that, at least for 2027, assuming there’s a fair bit of profit sharing (which seems like a big “if” to me).
This is going to have some major implications. Delta’s new pilot contract offers $7.2 billion in incremental value over a four year period. If American pilots get similar value, that will be greater 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.
I’m also curious how American goes about accounting for the retroactive pay increases. That’s potentially going to lead to a pretty significant loss in the next couple of quarters, accounting for one-time expenses.
Bottom line
American Airlines and the union representing pilots have reached an agreement in principle on a new contract. This looks very similar to Delta’s new contract, so it’s going to be costly for the airline. This contract offers well over $7 billion in incremental value over the course of the next four years.
I guess airlines have to hope that airfare and demand just keeps going up, or else they might have a hard time paying these wages while turning a profit.
What do you make of this development with American pilots?
1000 hours per year a huge over estimation, especially for the younger generation of pilots. I would say an average credit of 850 hours per year is closer to reality. We spend all our per diem and more during trips because eating healthy costs about $35 per meal these days when you’re at an airport or downtown layover.
sounds like more airline bankruptcy in the next decade
As a former pilot for the majors, I applaud this 100%! The back pay clause is HUGE because it holds management accountable for dragging their heels! Those lump sum checks will be awesome for all my buddies still flying the line! I’m only 53 and was a casualty of the 9/11 “lost decade”! I quit with lifetime flight benefits the day after I could and never looked back! I still could have a 12 year...
As a former pilot for the majors, I applaud this 100%! The back pay clause is HUGE because it holds management accountable for dragging their heels! Those lump sum checks will be awesome for all my buddies still flying the line! I’m only 53 and was a casualty of the 9/11 “lost decade”! I quit with lifetime flight benefits the day after I could and never looked back! I still could have a 12 year 2nd career but just cannot bring myself to go there! Travel is my passion…..flying the plane was just a means to an end!
those retro checks will be enough to get some senior pilots to quit.
It isn't a matter of anyone dragging their feet. Anyone that thinks any airline could or should have signed a labor agreement during a pandemic is nuts. Given the low amount of retro that covers that period including for DL which was under mediation w/ its pilots, there is no reasonable expectation to think that pilots would have gained much during the...
those retro checks will be enough to get some senior pilots to quit.
It isn't a matter of anyone dragging their feet. Anyone that thinks any airline could or should have signed a labor agreement during a pandemic is nuts. Given the low amount of retro that covers that period including for DL which was under mediation w/ its pilots, there is no reasonable expectation to think that pilots would have gained much during the pandemic.
Retro is simply a means to account for the fact that airline labor contracts never expire and airline labor cannot strike. It is a fair tradeoff to ask for retro.
Nobody dragged their feet.
AAL-American's parent - just increased its profit margin guidance for the 2nd quarter - based on lower fuel prices and strong demand.
AAL can afford the pay raises and the fact that they so quickly followed Delta shows that they can. The pressure is now on Southwest and United, the latter of which is already cancelling more flights at the beginning of every day than any other US airline.
I think it’s great when labor can make $600,000 a year! Right On!
Does anyone ever look at corporate profits and absolutely no taxes and get rebates and tax returns checks in millions and not paying taxes and do you know who gets the bill middle class no write offs wake up
You think airlines don’t pay taxes?
They don't on fuel, which is a fair portion of their cost.
Half the pre tax profit of my airline was lost to taxes, which degrades my profit sharing check as an employee… So yes of course airlines pay taxes. Stop parroting crap you’ve heard by word of mouth just to get you emotionally invested in a stance. Definition of a “useful idiot”!
@Jerry,
Airlines absolutely pay both federal and state levied taxes on Jet-A. Who told you they don’t pay taxes on Jet Fuel?
With a knick knack paddy whack give a dog a bone - who cares except that socialism will eventually rip this country to shreds
Why do you hate the middle class? Why do you hate hard working professionals? Do you feel the same way about other professionals?
Good luck American! Will probably land in bankruptcy court soon as airfare prices cannot just keep going up and up forever without people finally saying enough is enough! Pilots do not deserve wages that could actually bankrupt the company that you work for! The computer onboard does most of the work and AI will one day fly all planes worldwide! It's coming! Enough is enough!
AA landed in BK last time all while paying pilots peanuts…..that was the market rate then, this is the market rate now!
I love pilots, my dad was an AA captain. But even I know, with a liberal arts degree that this contract isn't sustainable. This is short term gain for long term pain. I hope I'm wrong, but history shows that this industry is like a roller coaster. Downtimes are coming.
DL,
That’s ok, you could’ve just as easily have told AA management that the outsourcing of huge chunks of flying in the last 2 decades to underpaid RJ pilots just to keep costs dirt cheap is short term gain for long term pain…. This is precisely what precipitated the pilot shortage they made it a really crappy career choice, Even Sully testified in Congressional hearings he would be hesitant recommending being an airline pilot as...
DL,
That’s ok, you could’ve just as easily have told AA management that the outsourcing of huge chunks of flying in the last 2 decades to underpaid RJ pilots just to keep costs dirt cheap is short term gain for long term pain…. This is precisely what precipitated the pilot shortage they made it a really crappy career choice, Even Sully testified in Congressional hearings he would be hesitant recommending being an airline pilot as a career choice…. Well after years of suppressing wages this what they have gotten on the back end.
AI is going to take ALL of our jobs.
Time to sell aa stocks
Irregardless of these new pilot contracts the fact of the matter is that total compensation lags far behind the year 2000 pre 911. Pilot pay has been tied to bankruptcy deals agreed to 20 years ago. My math still puts DAL pay more than 30% in the hole and still zero pension.
Pensions are so yesteryear. If pilots can't manage their own retirements with generous retirement savings contributions, then they quite simply shouldn't make what they do.
the new Delta contract will raise the denied contribution levels to 18% - by far some of the richest in any sector in the US.
Legacy carrier defined contribution benefits are far more than the average American's all inclusive salary
Tim Dumb,
That in no way negates what Don stated. They are still behind.
Your Math is absolutely correct Don!
Where is Eskimo to advocate pilots be replaced by AI? He must be running late today.
This is absolutely great news for American's pilots and its flight attendants who are certain to settle with the company; airlines simply cannot settle w/ one major labor group and not settle with the remainder.
The cost to AA just for the pilots will be high - but it will be even higher when you add in the cost of a new FA contract which will certainly have to include boarding pay unless the...
This is absolutely great news for American's pilots and its flight attendants who are certain to settle with the company; airlines simply cannot settle w/ one major labor group and not settle with the remainder.
The cost to AA just for the pilots will be high - but it will be even higher when you add in the cost of a new FA contract which will certainly have to include boarding pay unless the union sells junior FAs that work short flights down the river and pads rates for senior FAs.
AA can clearly afford this or they wouldn't have agreed to it. Their CEO said months ago they knew the price they had to pay and w/ the most senior pilot force of the big 3, they have to hire plenty of new pilots but also will benefit from lower average pilot rates as senior pilots continue to retire and new pilots take time to ramp up.
It is actually United that is most at risk financially in having to sign costly labor contracts w/ pilots and FAs. AA has slowed its fleet spending to one of the slowest rates for large airlines and is paying off debt. In contrast, UA's fleet spending commitments are more than 3X AA's and DL's and the same debt problems that hurt AA will hurt UA.
Further, the latest two major policy initiatives that DL is supporting will benefit AA - the request to move Haneda slots (which AA and HA both support but UA does not want) and increased beyond perimeter access at DCA which will make AA's DCA hub more valuable, even if also creates opportunities for DL.
AA's profit margin over the past 5 years does not impact how well they can pay for new labor contracts but rather what they will make in the future. AA's domestic system is incredibly profitable right now and they will benefit from consolidation of B6 and NK at FLL - which is likely to happen - even if DL grows its Latin America presence w/ Latam.
AA's profit margin in the most recent quarters has been on par with DL and UA for the first time in decades. They have people that are managing the company for profitability, something that hasn't been the case for years, even if they may have a small international network and if they still lag in a number of customer areas.
AA can afford this contract and it is now UA and WN that are in the crosshairs to pony up the big bucks for labor.
AA and UA just happen to be in continuous back and forth in terms of who is up and who is down; they have rarely both been "up" at the same time.
As much as some people are stuck in the narrative of the last decade about AA, they are the one heading up financially while UA is heading down.
Appreciate the thoughtful analysis, Tim.
It’s about time the pilots get a raise, working under a forced bankruptcy contract for 12 years is ridiculous!
They were/are working under a late 2014 merger negotiated deal that APA asked for and negotiated with Doug Parker so that US would take over AA instead of APA keeping Tom Horton, the old AA CEO. Ironically, nothing to do with the bankruptcy since they specifically negotiated with Doug Parker to get out of that contract.
I predict that this will lead to the next round of bankruptcies. Once the economy dips even slightly, all of the airlines won't be able to afford these agreements, and this is just one of them. Many more unions to carve out their pound of flesh yet to come.
So they think most of us will travel no matter what, price be damned? At some point people will just enjoy leisure differently if plane tickets get *too* high
You should take a look at airfares dollar adjusted since deregulation and then admit how foolish that comment is.