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By Rajesh Kumar Singh and David Shepardson
CHICAGO, Dec 2 (Reuters) – Delta Air Lines has given its pilots a cumulative 34 percent pay increase over three years in a new contract, demonstrating the bargaining power fliers enjoy in a short-staffed industry , with travel demand booming.
If the deal is approved by Delta pilots, it is expected to act as a benchmark for contract negotiations at rivals United Airlines and American Airlines.
Delta pilots will receive a raise of at least 18 percent when the contract is signed, another 5 percent after one year, 4 percent after two years and 4 percent after three years, according to a draft contract seen by Reuters.
They will also receive a one-time payment equivalent to a cumulative 22% of their earnings between 2020 and 2022 after the agreement is ratified.
The Atlanta-based carrier’s pilots have worked without a new contract for nearly three years after their old contract became variable in December 2019, fueling frustration.
They voted overwhelmingly in October to authorize a strike if negotiators could not reach an agreement on the new contract.
INSTALLATION COSTS, HIGHER RATES
The big wage increases are expected to further exacerbate cost pressures for carriers, just as worries about a U.S. recession stoke worries about consumer spending.
Although ticket sales remain strong, investors worry that demand for travel could decline, making it harder for a debt-laden industry to repair its balance sheet. They fear carriers could be forced to borrow even more money to finance operations.
Still, a scramble among carriers to secure staff to capitalize on booming consumer demand has increased pilots’ bargaining power. With the industry returning to profitability, pilots say airlines can pay them more to cover their increased cost of living.
Airlines, until now, have relied on strong demand and higher fares to ease inflationary pressure. Any increase in labor costs is expected to be passed on to customers through higher ticket prices.
In the draft agreement, Delta promises that its pilots’ wages will exceed those of United and American by at least 1 percent.
In a memo to its members, the union representing Delta pilots said the deal represents a cumulative increase of more than $7.2 billion over the next four years.
Delta said it was “pleased to have reached agreement in principle on a new pilot contract, one that recognizes the contributions of our pilots to Delta’s success.”
In a year of protests for the industry, pilots at all major US carriers have demanded higher wages and a better work-life balance.
Hundreds of United pilots picketed outside Chicago’s O’Hare Airport on Thursday, demanding an “industry-leading” contract. Last month, they rejected an offer that included cumulative pay increases of more than 14.5 percent and increased overtime and training pay.
American pilots also rejected a proposed 19 percent pay raise over two years that would have cost the Texas-based carrier about $2 billion.
Pilots also demand a better quality of life. They say staffing and operational problems at the carriers are increasing overtime, leaving them exhausted.
In its memo, Delta’s pilot union said more than 25 percent of the contract value is dedicated to quality-of-life items. (Reporting by Rajesh Kumar Singh and David Shepardson; Editing by William Mallard)