A new transportation services agreement to operate 10 Boeing 767 cargo jets for Amazon paved the way for pilots at cargo airline ABX Air over the weekend to ratify an extension of their labor contract until 2030, company officials said Tuesday.
Amazon’s assignment of planes to ABX Air was also made possible by union leaders’ more collaborative approach to jointly growing business after a history of tensions and a shortage of captains at sister airline Air Transport International, they said.
Parent company Air Transport Services Group (NASDAQ: ATSG) on Monday announced it signed a five-year deal with Amazon to operate an additional 10 Boeing 767-300 converted freighters on behalf of its largest customer, which will supply the aircraft. ABX Air will hire more than 50 pilots to support the new contract.
The pilot contract was negotiated in three days and provides Amazon (NASDAQ: AMZN) with the long-term labor stability it needs, ATSG Chief Executive Officer Joe Hete said during an earnings call with analysts about the company’s first-quarter results. The agreement came about because the pilots approached the company and offered to extend it beyond the 2026 eligibility date for making amendments.
The Airline Professionals Association “had a hole to dig out of and finally came to the realization that maybe there’s a better way to approach this than the traditional, let’s- go-after-the-company kind of thing. They came to us with an offer to extend the existing agreement to give potential customers some comfort that they wouldn’t experience any labor disruptions in the future,” he said.
Hete was referring to a short strike initiated by the union in 2016 during the first year of operations for Amazon’s private airline and on the eve of the Black Friday shopping period. The strike disrupted fulfillment operations and soured Amazon on giving new business to ABX.
Amazon is expected to provide the first cargo jet in June and the remaining aircraft by year’s end. The agreement includes an option for Amazon to sublease 10 more aircraft to ATSG after 2024.
Only four of the 40 B767 cargo jets currently flown by ATSG for Amazon are under the ABX brand. Air Transport International operates the other 36 aircraft in Amazon’s domestic parcel network. The new deal will bring to 50 the number of aircraft in ATSG’s Amazon portfolio, including 30 planes owned by ATSG and leased to Amazon as part of a bundled service package.
FreightWaves recently reported on how the Airline Professionals Association has adopted a more conciliatory style to help rebuild trust with management, including acting as an unofficial ATSG marketing arm that promotes high service levels before potential customers.
“They’ve also done a fabulous job over the last several years presenting themselves at industry conferences. Normally, you will not see airlines and unions represented at the industry conferences,” said ATSG President Mike Berger. “They’ve done a really nice job of rebranding themselves in a very positive way. And I think this is an example of the fruits of their labor.”
Hete said the combination of a changed union attitude and the better hourly pay scales it could offer because of higher rates in the Amazon contract enabled a collective bargaining agreement and the ability to attract new pilots.
“You have to have realistic expectations on both sides of the table. Obviously, we had to give some stuff up. And obviously they had to pull back from what others think the market is for our type of business,” the CEO said. “We’re not a passenger airline, we’re not a FedEx or UPS. We’re in a different marketplace altogether. And, you know, when people put their minds to it, they can come to an agreement that works for everybody.”
While management and the unionized pilots at ABX Air are rowing in the same direction, relations between ATSG and the Air Transport International pilots are frayed. The ATI pilots, represented by the Air Line Pilots Association, earlier this year asked the National Mediation Board to disband mediated negotiations so they can eventually call a strike. The sides have been in talks since late 2020. The union has accused the company of stalling serious talks until a contract with Amazon is renewed in 2026, which would better enable executives to know what cost increases they could bear.
The union says ATI pilots are underpaid and overworked because of unfavorable crew scheduling, which resulted in 250 pilots leaving the airline last year. ATI has about 600 pilots. Union officers have said they want a contract similar to one approved at Hawaiian Airlines last year.
ABX pilots enjoy slightly better pay than their ATI counterparts. A 12-year captain makes $288 per hour at ABX and $282 at ATI. Someone with the same experience level at Atlas Air, another Amazon partner, earns $298 an hour, according to figures from ALPA.
ATSG and ATI union leaders participated in another mediation session last week. Hete said on Tuesday he doesn’t expect an agreement to be completed this year because the union is being unrealistic.
“I think the fact that we were able to get something across the plate with the ABX guys says the company can get there from here,” he said.
One reason ABX was a better candidate to take the new Amazon workload is that Air Transport International doesn’t have enough captains. The airline has hired plenty of first officers, but most don’t have enough experience to be captains yet, Hete said. The Air Line Pilots Association blames unsatisfactory working conditions and compensation for the shortfall, saying 250 pilots left the company last year — a 45% attrition rate.
The high turnover means Air Transport International is hiring pilots without sufficient experience to be in charge of a widebody jet like a 767, leading to a high washout rate during training and a workforce shortage, Mike Sterling, chair of the ATI Master Executive Council, told FreightWaves in February.
“The ABX option with the new agreement certainly made it easier for us to onboard the necessary people in the tight time frame that we have,” Hete explained. “We have to get these aircraft into service by December 1. And that’s a lot of airplanes to bring on when we won’t receive the first one until June.”
ABX pilots also offer a cost advantage because all flights begin and end where the crew is permanently based. If pilots want to live elsewhere, they are responsible for getting to work on their own time and expense. Air Transport International pilots live around the country and are provided a company-paid ticket to whatever airport the aircraft is departing from. And the ATI pilots receive premium pay that has negatively impacted earnings in recent quarters, Hete added.
ATSG reported adjusted pretax earnings of $15 million in the first quarter, down $23 million from the same period in 2023.
The company’s stock closed at $14.67 per share on Tuesday, up 12% from Monday’s open.
Click here for more FreightWaves stories by Eric Kulisch.
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