CHARLOTTE, N.C. -- A new survey shows that pilots at overnight cargo carriers FedEx ( FDX - Get Report) and UPS ( UPS - Get Report) command the highest salaries among the 11 largest U.S. airlines, while pilots at US Airways ( LCC) are the lowest paid. The discrepancies reflect trends that have shaped airline pay patterns since the Sept. 11 terrorist attacks, including a round of bankruptcies that enabled reduced costs at passenger airlines and a unique battle between pilots at US Airways, as well as society's increasing reliance on the overnight carrier duopoly. For the overnight carriers, "the barriers to entry are high, the Internet boom has helped them a lot and the business wasn't that badly affected by 9/11," says Louis Smith, a retired Northwest captain who is president of Flt.Ops.com, which provides career counseling for pilots and conducted the pilot pay survey.
Among the 10 leading passenger carriers, four sought bankruptcy protection during the four years following the attacks and the concurrent economic slowdown. For the industry, the bankruptcy restructurings enabled two years of profits, in 2006 and 2007, following a five-year period when net losses totaled about $35 billion. For decades, pilots for passenger carriers were kings of the sky, while pilots for overnight and cargo carriers were sometimes thought of as not-ready-for-prime time. In recent years, that perception has disappeared. The current recession is impacting both overnight and passenger carriers. FedEx and UPS are each seeking $1 billion in annual cost reductions, and pilot costs are not exempt. UPS, for instance, wants $40 million in 2009 savings from its pilots, as well as additional savings in future years. The company, which recently retired its DC-8 fleet, says it has 300 pilots more than it needs.
Passenger carriers may have the advantage now, Smith says, because each of the major carriers generate hundreds of millions of dollars annually in fees for baggage and other services. "Fed Ex and UPS can't add fees and become luggage shipping companies the way the passenger airlines have done, and they can't stimulate demand by cutting ticket prices," Smith says. Pilot contract negotiations are currently under way at American ( AMR - Get Report), Continental ( CAL - Get Report) and United ( UAUA). Meanwhile, at US Airways, pilots made concessions in bankruptcy to keep the airline afloat. The new, low-cost structure enabled a 2005 merger with America West. But pilots have been unable to agree on a seniority policy, which has hindered efforts to jointly negotiate new contracts, leaving existing contracts in place. Pilots from the original US Airways "contributed $6.8 billion, including pension reductions, over the course of two bankruptcies to keep the company alive," says Arnie Gentile, spokesman for the U.S. Airline Pilots Association, which represents US Airways pilots. "Then the company turned its back on the pilots and has not negotiated new contracts." Gentile says the airline has used the seniority dispute as an excuse, noting, "US Airways had many opportunities to reach an agreement with its pilots prior to the dispute over seniority issues." However, airline spokeswoman Michelle Mohr says the airline wants to be responsive to pilots and did make a 2007 contract offer that would have increased annual spending for pilots by $122 million. "The seniority issue isn't an excuse for us," Mohr said. "We know our pilots are working very hard to integrate the seniority lists, and we are trying to be respectful of their process for determining what is going to work best for them."
Beyond unique US Airways issues, Gentile says that across the passenger airline industry, the pilot profession is being diminished by low wages, particularly for entry-level pilots who make just $21,600 at US Airways flying the Embraer E190, and even less at the regional airlines where may pilots get their first jobs. Rebecca Shaw, the first officer on the Colgan Air flight, flying as Continental Connection, that crashed near Buffalo, N.Y., in February, killing all on board, had worked 13 months for Colgan and earned $23,900 annually, the carrier has said. Initially, National Transportation Safety Board investigators had said she earned $16,000 annually. Nevertheless, the airline industry's high safety standards are threatened by a reduced salary structure, says Gentile. "Far fewer pilots (are) looking for commercial airline jobs," he says. "Today, when given career choices, both experienced pilots and young individuals breaking in have difficulty justifying the financial sacrifice."