UPS Mechanics Take Symbolic Strike Vote

Aircraft mechanics at United Parcel Service  ( UPS) , frustrated after three years of contract negotiations, voted to authorize a strike against the shipping giant. But regulations governing contract negotiations should limit the risk to UPS going into the critical holiday season.

About 98% of International Brotherhood of Teamsters members who voted supported a strike in a mail ballot taken as UPS reported third-quarter earnings that came in ahead of expectations and announced plans to acquire 14 Boeing 747 jets between 2017 and 2020 to expand its global operations. The union has complained that UPS is demanding "huge health care concessions" in talks and added costs to retiree health care coverage.

The company in September also granted new stock incentives and other benefits to a number of top execs, and in recent weeks said it would acquire health care specialist Marken for terms undisclosed and invest more than $500 million in new facilities to grow its capabilities.

"If UPS can afford major capital investments and huge raises for top brass, then UPS can also choose to invest in the maintenance workers who do strenuous and dangerous work every day to make its success possible," mechanic Jim Kelley said in a statement released by the union.

But the near-term ramifications to the vote are minimal, as talks between the two sides are governed by the Railway Labor Act. Under the RLA, airline contracts do not expire, they only become amendable, and only the federal National Mediation Board can authorize a strike. With dates for continued negotiations already scheduled through the end of the year, it is extremely unlikely the NMB would now give a green light to the union to walk off the job.

Even if there is no strike, the added tensions are a risk to UPS investors. The Teamsters said they have the support of UPS pilots, who in August agreed to a new deal with the company after five years of tense negotiations.

A UPS spokesman argued in a note that company mechanics are currently among the best paid in commercial aviation, with a company-funded retirement plan and a 401(k) plan with a match. Mechanics currently receive "comprehensive" health insurance with no annual contribution, according to the spokesman.

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