KEY POINTS

  • The profitability of U.S. airline companies is entering the 10th year
  • Employees including pilots are seeking a hike in wages
  • Airlines stocks were not doing great, hurt by the grounding of Boeing 737 Max jets

U.S. airlines are marking a full decade of profitability this year and employees, including pilots, are demanding a pay hike.

Although profits of U.S. airlines peaked in the middle of the decade, analysts have paced down the net income growth of many U.S. airlines to less than one percent from this year.

“When the airlines are making money, it’s hard to deny the increase” in compensation, commented Kit Darby, a consultant tracking pilot pay.

More labor pacts next year

According to a CNBC report, top U.S. carriers are in talks to clinch labor agreements with their 120,000 unionized employees. But new wage pacts will add to their expenses.

Rising labor costs of airlines consumed 28 percent of U.S. airlines’ $187 billion revenue in 2018, up from 21 percent in 2008, after hiring and compensation jumped, per trade data.

Southwest inked an agreement with mechanics in March. The five-year contract spells $160 million in back pay and a 20 percent increase in wages.

“Since August, teams for the company and the union have met for multiple days nearly every week,” said American Airlines spokesman Josh Freed, noted CNBC. He added the two groups have “made considerable progress.”

Pilots want higher wages and better working conditions

Pilots are demanding higher wages, a better quality of life through improved scheduling and want fewer pilots on reserve. Reserve requires pilots to be on call and change trips frequently.

“Scheduling is our No. 1 issue,” noted Allied Pilots Association President Eric Ferguson. The union is also seeking higher pay for flying less-lucrative trips.

Pilots at Delta Airlines, represented by the Air Line Pilots Association, want a better quality of life besides the pay hike. Delta pilots also cited working overtime in the summer as the airline expanded its flight schedule to meet customer demand after the cancellation of flights by rivals that flew the Boeing 737 MAX. Delta is an exception and was not flying the troubled jetliner.

Hiring to increase

On the airlines’ side, they are racing to hire new employees to keep pace with strong travel demand and pilot shortage. The mandated retirement age of pilots is 65. Most airlines have been beefing up their recruitment over the past two years.

Delta Air Lines reported higher third-quarter profits and offered an upbeat outlook on US consumers, but shares fell over a fourth-quarter forecast that reflects higher-than-expected costs
Delta Air Lines reported higher third-quarter profits and offered an upbeat outlook on US consumers, but shares fell over a fourth-quarter forecast that reflects higher-than-expected costs GETTY IMAGES NORTH AMERICA / MARIO TAMA

Meanwhile, in the stock market, the stocks of major airline carriers were not having a great time in 2019, per a Yahoo Finance report.

The problems that hurt the stocks ranged from lackluster cargo business stemmed by reduced freight demand, revenue loss from flight cancellations in the aftermath of the grounding of Boeing 737 MAX jets.

The American Airlines anticipates its full-year pre-tax income will be sliced by roughly $540 million due to the grounding of Max jets.

According to Fox News, United Airlines that flew 737 MAX has excluded the grounded jet from its schedules until June next year.

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