UPS Plans Pilot Furloughs

UPS will begin in May to furlough 300 or more of its airline pilots to cut operating costs during what the company expects to be a gradual recovery.

In an announcement Monday, the world’s largest package delivery company said it is involved in talks with the pilots’ union to find ways to avert or mitigate the layoffs before they take effect. UPS employs about 2,800 pilots, represented by the Independent Pilots Association.

UPS has been working with its union for the past year to identify ways to cut operating costs to avoid any pilot furloughs.

Last June, the IPA identified significant savings through voluntary programs such as pilots taking short- and long-term leaves of absence; military leaves; job sharing; reduction in flight pay guarantees; early retirement, and sick bank contributions. UPS subsequently agreed not to furlough any pilots in 2009.

If the furloughs go forward, they would be phased, with the first 170 pilots receiving notices in 2010. The initial group would be furloughed in May, the company said.

The notice comes shortly after UPS reported a $757 million operating profit in the fourth quarter, nearly triple the profit from a year ago. The surprising expansion came on stronger international and domestic air express demand.

“Even though the economy has begun to turn around, UPS anticipates a very gradual recovery and a continued need for belt-tightening,” said UPS Airlines President Bob Lekites. “This is a painful decision for our people, but one that is right for the on-going health of our business.

“But we haven’t given up on this process,” Lekites said. “We continue to go well beyond our contractual obligation to seek a ‘win-win’ solution to avert furloughs.”

Over the past two years, UPS has cut $1.4 billion in costs through such moves as a freeze on management salaries in 2009, suspension of the match for 401(k) plans, trimming capital expenditures and retiring older aircraft.

Most recently, UPS announced on Jan. 8 it was streamlining its entire domestic U.S. small package structure, eliminating 1,800 management and administrative positions across the country.

“Companywide, we will continue to evaluate all opportunities and make adjustments as necessary to ensure our company is well-positioned to emerge stronger than ever as the economy continues to recover,” said Lekites. “We applaud our pilots for the way they’ve joined with UPS in trying to tackle this problem and hope we can identify a mutually beneficial outcome.”