American Airlines pilots have a new agreement on the table that proposes about a 21% pay raise for this year on top of back-dated raises going back to 2020 and more increases in years to come.
On Friday, the Allied Pilots Association, which represents American’s more than 15,000 pilots, reached an agreement in principle with the Fort Worth carrier.
These pay raises could significantly impact consumers and their summer travel plans. The two biggest costs for a carrier are fuel and wages. Carriers with new pilot deals will need to figure out how to factor in billions in new expenses and still stay financially afloat.
American needs higher fares to stay profitable to absorb the impact of the increases across the industry, not just the pilot pay raises, George Ferguson, senior aerospace, defense and airline analyst at Bloomberg Intelligence said.
“There’s wage increases everywhere across the airlines right now, but the pilots are definitely getting the most,” Ferguson said.
The higher airfares, Ferguson said, have already kicked in.
“It’s already been planned for it in there as much as they can get, because it’s a very competitive market,” Ferguson said. “(Airlines) have an idea of how much they’ve got to increase fares in order to get back those higher costs.”
Airfare is higher this year for international travel, according to Hopper. Plane tickets to Europe and Asia this summer are the highest in more than five years. Trips to Europe average over $1,100 per ticket and trips to Asia average over $1,800 per ticket. Domestic airfare is averaging $306 per ticket.
Airlines are facing the same issues other sectors of the economy are facing with older skilled laborers leaving the workforce faster than expected, said Christopher Raite, sector analyst of industrials and materials at Third Bridge Group Limited.
“When you have the knowledge drain, it’s twofold,” Raite said. “Obviously you’re losing a great employee, but the gap then with the new employees, is even more apparent.”
Here’s the breakdown of the deal. The contract terms are dependent on an anticipated ratification date of Aug. 1.
The contract is effective for four years and will be amendable again on Aug. 1 2027. Pilots would be back paid, based on eligible earnings, 4% from 2020, 4% from 2021, 14% from 2022 and about 21% for 2023 in the three months preceding the date of signing.
Isom had said in March that American’s pilots would receive a 21% pay increase on average in the first year. At that point with base salary and 401(k) matches, captains operating narrow-body planes, typically used for short-haul domestic and international flights, would make $475,000 a year at the top of the scale, a $135,000 bump from what they earn today. Captains piloting wide-body planes, larger aircraft that typically fly long hours non-stop, would make $590,000 at the top of the scale, or $170,000 more than the current salary.
The pay rates, the union said, meet or exceed Delta’s pay rates. Pilots at Delta Air Lines approved a contract earlier this year, raising their pay by more than 30% over four years.
According to CNBC, Delta’s pilots received 18% raises on the date of signing, and will receive 5% raises in 2024, 4% in 2025 and 4% in 2026, varying on the aircraft type and years of experience. Delta’s contract runs through December 2026 and ground, scale and merit employees saw pay raises on April 1 this year.
American’s pilots would receive about a 21% increase for this year, 5% in 2024, 4% in 2025, 4% in 2026 and 3% in 2027, the year the contract would become amendable. The increases would occur on May 2 of each year.
In 2024, pilots would receive a 17% 401k contribution, and in 2026, the contribution would increase to 18%.
The new contract would also improve profit sharing to match Delta’s at 10% up to $2.5 billion pre-tax profit, and 20% for anything above.
There are also new terms for benefits, long-term disability and more.
The parties still need to wrap up contractual language for the agreement. Once completed, the negotiating committee will present the agreement in principle to the union’s board of directors for consideration. The board needs to review the proposed agreement at least seven days before any meeting to consider the tentative deal.
“It’s a major step in aligning everybody’s eyeballs, running the best airline possible and continuing to take care of our passengers,” Dennis Tajer, Allied Pilots Association spokesperson told The Dallas Morning News on Friday. “And, just as importantly, going out there and beating the competition.”
The summer travel season will pick up this week and pilots could see increases towards the end of the summer.
“We’re pleased to have reached an agreement in principle on a new four-year contract with the Allied Pilots Association 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,” said Sarah Jantz, spokesperson for American Airlines. “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.”
