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UPS to furlough pilots for its first time ever

Shipping giant UPS, which said just last month that the improving economy helped boost its first-quarter profit and its outlook for the year, is preparing to furlough dozens of pilots.
/ Source: The Associated Press

Shipping giant UPS, which said just last month that the improving economy helped boost its first-quarter profit and its outlook for the year, is preparing to furlough dozens of pilots for the first time ever as part of a long-anticipated cost-cutting move.

The company, which has 2,819 pilots, said it simply has more pilots than it needs. It says it tried, but failed, to reach a deal with the pilots union on enough concessions that would have averted the need for furloughs.

The furloughs come at a time when demand for passenger airline seats and cargo airline services have shown improvement amid the rebound in the economy. But carriers are continuing to be cautious with staffing levels until they see more improvement and signs that the rebound is sustainable. Pilot contract talks are ongoing at several major passenger airlines, including AirTran Airways, where pilots have authorized their union to call a strike.

UPS has said that it will spend less money in 2010 than it has previously on things like equipment, airplanes and trucks. It also has announced it would cut management and administrative jobs — although it said it would reinstate pay raises for managers.

UPS, based in Atlanta, warned in February that its pilots would need to agree to more cost savings or the company would have to furlough at least 300 of them.

UPS said Wednesday that the first 54 furloughs are expected to happen Sunday.

Furloughs, by definition, idle employees for an indefinite period. Spokesman Norman Black said the pilots to be idled could be recalled to duty if business conditions improve further.

UPS did not say when the next round of furloughs might occur, though it could be before the end of this year. The union that represents UPS pilots said the company has already notified another 116 pilots of their furlough dates.

The union said in a statement that it had already agreed to cost cuts that it believes should be enough to keep any pilots from being furloughed well into 2011. It suggested that UPS is acting in bad faith given the improvements in the economy that the company itself has noted.

The two sides previously identified savings totaling roughly $90 million over three years. UPS said it wanted $131 million in cost savings. The union claimed in its statement Wednesday that UPS pulled a "bait-and-switch" by raising the cost savings it was seeking to $244 million through 2015.

UPS said it has acted appropriately. The company said it is currently flying 48 fewer aircraft than at its peak in 2003. It also has retired older aircraft in favor of larger, more efficient planes. The company also noted that a federal rule change that raised the mandatory retirement age for commercial airline pilots from 60 to 65 has kept 200 pilots on the UPS payroll who previously would have been required to retire at age 60.

Black said that based on seniority, the majority of the furloughs are expected to come from the company's crew base in Alaska, where a lot of junior pilots are currently assigned. He said that the company has agreed to pay furloughed pilots for accrued sick time, which, for many pilots, will amount to roughly $20,000.

UPS spends roughly $185,000 a year in pay and benefits per pilot on average, according to the company.

Shares of UPS Inc., the world's largest shipping carrier, fell 39 cents to $64.90 in afternoon trading.