Profit Sharing, Pensions to Dominate Airlines’ Next Round of Labor Talks

Profit Sharing, Pensions to Dominate Airlines’ Next Round of Labor Talks

Earlier this month, Delta Air Lines announced that it was paying out over $1.1 billion in profit sharing to its more than 80,000 employees, which Fortune reported was the second-largest payout in its history after the $1.5 billion it shared last year. Over the past five years, Delta said it had paid out nearly $5 billion through its profit sharing program, which returns 20 percent of its annual pre-tax profits to the employees if they exceed $2.5 billion and 10 percent if not.

Profit sharing has become an increasingly common feature of progressive employers in recent years, in sectors from manufacturing to tech and show business. Advocates have touted it as a potential remedy to the problem of wage stagnation at a time when many corporations are posting record profits.

The good news for Delta’s employees was somewhat less welcome to its competitors, however. At American Airlines, which introduced profit sharing in 2016 at a rate of 5 percent, and whose profits for 2017 were smaller than Delta’s, employees are “concerned because their profit sharing rate is less than at either Delta or United,” Ted Reed observed at Forbes:

A Delta captain will get a payout of $29,000 to $59,000, according to the Allied Pilots Association, which represents 15,000 American pilots, while a United captain gets between $9,300 and $20,500 and an American captain gets $3,600 to $7,500. … The union wants to discuss higher profit sharing with management, APA spokesman Dennis Tajer said Wednesday.

Pilots at United also plan to focus on compensation in their upcoming contract negotiations. Even though American is now facing competitor and union pressure to return more profits to its non-management employees, its CEO Douglas Parker has expressed an intention to increase pay for crew members: Last year, he unveiled a plan to raise wages by $930 million through 2019, but investors balked at that plan and the airline’s stock dropped by more than 8 percent in its wake (though it recovered soon afterward). The investors’ negative reaction suggested that Parker had not succeeded at persuading them of the business case for increasing investments in talent.

Another issue likely to come up in the next round of union contract negotiations for the major US airlines is retirement, Bloomberg reported last week, as pilots want to see the revival of pension plans that were terminated or frozen in the wave of bankruptcies and consolidations that transformed the industry over the past decade and a half. Pilots are required by law to retire at 65, so the APA says it wants to ensure that pilots approaching retirement in the coming years are financially secure. The major airlines are sitting on large piles of cash, the union argues, and should be able to afford a greater investment in the retirement security of senior pilots.