UPS Starts Pilot Furlough Process

Louisville, UPS (NYSE:UPS) today announced plans to furlough at least 300 of its airline pilots, but at the same time continued its effort to find a solution with the pilots’ union that would avert or mitigate the layoffs before they take effect. UPS employs about 2,800 pilots.

UPS has been working with its union, the Independent Pilots Association, 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 it would not furlough any pilots in 2009.

The two sides have been working cooperatively ever since to identify additional cost-cutting initiatives that would eliminate the threat of layoffs entirely. Subsequent discussions have failed, however, to identify sufficient operating savings.

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.

“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 continued. “We continue to go well beyond our contractual obligation to seek a ’win-win’ solution to avert furloughs.”

UPS is well recognized for its commitment to employees, and the company strives to build upon its union relationships to maintain its position as an industry leader. For example, UPS and the Teamsters have formed a Competition Committee to identify new ways of making UPS more competitive and to create jobs, both in its package operation and at UPS Freight. A similar process has been in place with the International Association of Machinists for the employees it represents who help ensure the efficient operation of the UPS network.

The pilot furloughs, if required, would be but one of many steps the company has taken over the past two years to match its resources to economic conditions. UPS has engaged in a company-wide, $1.4 billion cost-cutting effort that included 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.”

About UPS
UPS (NYSE: UPS) is the world’s largest package delivery company and a global leader in supply chain and freight services. With more than a century of experience in transportation and logistics, UPS is a leading global trade expert equipped with a broad portfolio of solutions. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. The company can be found on the Web at UPS.com and its corporate blog can be found at blog.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.