American Airlines Adds Benefits to Make Proposed Contract to Pilots Worth Over $9 Billion

American Airlines Group said changes it offered in a pending contract between the company and the Allied Pilots Association would increase its value to more than $9 billion, according to CBS News. The 15,000 pilots represented by the association are set to begin voting on the contract on Monday.

"Our commitment — my commitment — stands: Our pilots will be paid as well as the best-paid pilots in the industry," American CEO Robert Isom said in a video message to pilots. "And you've waited patiently for a new contract for a very long time, so we need to make those changes fast to stay on track for a ratification in August."

Senior management offered the union a laundry list of proposals including medical freedom protections, an increase in life insurance coverage and accelerated future wage increases, according to a memo to pilots from the APA. Captain Ed Sicher, the president of the APA, told pilots that senior management responded favorably to an invitation to negotiate and provided proposals designed to close negotiations as soon as possible.

In May, over 96% of APA membership voted on a strike mandate, with 99% of those pilots voting in favor of a strike. The APA has not yet issued public guidance indicating whether or not members should vote for or against the new proposal.

While voting begins Monday, pilots can have until August 7 to cast their vote.

"I encourage you to stay engaged, stay informed, and ensure that YOUR domicile representatives hear YOUR input regarding the path forward," Sicher wrote.

American was put under increased pressure after United Airlines reached a labor agreement with its the 14,000 pilots represented by the Air Line Pilots Association last week. The contract grants pilots a cumulative 34.5%-40.2% increase in pay raises during the four-year contract, and substantial improvements to benefits, according to Reuters.

Delta Air Lines also ratified a contract with its employee earlier this year, which includes over $7 billion in cumulative increases in pay and benefits, setting a new standard for pilot contracts.

"Delta and United are doing this, from the pay to the work-life balance issues," APA spokesman Captain Dennis Tajer told CBS News on Friday. "American has no choice but to match that, otherwise, you're not going to attract the few pilots that are out there."

The airline industry is currently short on about 8,000 pilots, and the shortage could grow to 30,000 by 2025, management consulting firm Oliver Wyman told CNBC last year.

In an effort to slow the shortage, the U.S. House of Representatives passed legislation on Friday increasing the commercial pilot retirement from 65 to 67. If passed in the Senate, the bill will also authorize a litany of U.S. Federal Aviation Administration aviation safety and infrastructure programs until 2027.

The commercial pilot retirement age is regulated by Congress and the FAA. In 2007, Congress raised the mandatory retirement age from 60 to 65, after reports found that age had an “insignificant impact” on pilots’ ability, according to Airways Magazine.

The United Nations’s International Civil Aviation Authority, which sets international rules for aviation, puts the retirement age at 65. As a result, pilots over that age aren’t allowed to pilot international flights. 

The Air Line Pilots Association is against the bill, arguing that hiking the retirement age could cause airline scheduling and pilot training issues, as well as require reopening pilot contracts. On the other hand, the Regional Airline Association supports the retirement age increase.

The trade association, which represents 17 North American regional airlines, argues that the legislation "allows retention of more experienced captains, who can in turn fly alongside and mentor new first officers, helping to stabilize attrition," according to Reuters.

The Association of Professional Flight Attendants, which represents American Airlines flight attendants, will hold an authorization vote to allow members to strike next week. American management has not responded to the economic proposals submitted to them by the union in March, according to APFA President Julie Hedrick.