Negotiating New Sources of Value for ALPA Pilots

Editor’s note: In celebration of ALPA’s 95th anniversary this year, this nine-part Air Line Pilot series revisits some of the union’s “wins”—successful campaigns, projects, and products that make public air transportation safer and more secure and that improve the working lives of the union’s members.

ALPA Wins, Part 3: Adding Value

In recent years, ALPA pilot negotiators at some of the union’s larger pilot groups have been particularly creative in bargaining for new sources of value for their members. Pilot compensation packages have reached new levels, reflecting both the economic recovery from the recent pandemic and the coordination of bargaining strategies among the Association’s pilot groups.

Working with the union’s Representation and Economic & Financial Analysis Departments, pilot Negotiating Committee members have pursued groundbreaking methods to increase a contract’s worth. Almost every section of these agreements contain changes that reflect technological developments and the evolving nature of air transportation.

This article examines several specific contract instruments deployed in the United States that warrant special attention, some of which can be replicated in Canada.

Setting the Stage

To understand the foundations for the current bargaining environment and the progress that’s been achieved, it’s necessary to look back at what the airline industry and airline pilots endured following the terrorist attacks of 9/11. This event completely changed the landscape of the industry as air carriers lost a reported $60 billion during the ensuing five years, prompting the loss of tens of thousands of airline jobs and sending numerous airlines into bankruptcy. Many pilots saw their defined-benefit pension plans taken away through court proceedings or as part of ratified agreements to save their airlines from ceasing operations.

And before the industry had fully recovered, ALPA pilots suffered another setback due to oil price spikes and the recession of 2008, which resulted in numerous airline mergers and additional bankruptcies.

“After the attacks of 9/11, our profession paid a heavy price to help our industry survive the downturns and bankruptcies that followed,” said Capt. John Prater, a former ALPA president who led the Association from 2007–2010. “Few pilots came through it without enduring concessionary contracts or furloughs. But in the end—armed with the desire to fight to restore our careers and contracts—we only redoubled our efforts to work together, in solidarity, for the benefit of all members.”

Creating a New Nest Egg

Introduced in 1978, 401(k) plans largely replaced pensions in the United States, enabling employees to save a portion of their income for their future. For 2026, the IRS permits employees to contribute up to $24,500, while employers and employees together can contribute up to $72,000 (plus catch-up contributions for pilots age 50 and older).

However, as airline compensation has grown and employer contributions have increased, some Association members have reached the IRS contribution limits. To increase pilot retirement savings, ALPA negotiators have explored alternative financial options that employ tax-deferred mechanisms.

The Pension Protection Act of 2006 resulted in the introduction of the market-based cash-balance plan (MBCBP), an investment option the Delta pilots have recently implemented. They successfully seized on the opportunity presented during their COVID furlough-mitigation negotiations to build long-term value for the pilot group.

The MBCBP was negotiated as part of Furlough Avoidance Letter of Agreement 20-04 and executed with Market-Based Cash-Balance Plan Implementation Memorandum of Understanding (MOU) 23-03. The MOU states, “The company will fund the MBCBP base allocations with cash contributions into the MBCBP’s trust on a monthly basis to replicate current benefits to the greatest extent possible.” The new plan became effective Oct. 1, 2023.

Generally, this type of retirement investment would be taxed at a pilot’s highest marginal tax rate. With an MBCBP, while the individual has no control over how the plan is invested, the money is treated similarly to a pretax 401(k). And at age 59½, the account holder can withdraw funds, even if still employed. Withdrawals can be taken as annuities or lump-sum distributions, and lump sums can be rolled over to a pilot’s 401(k) or to an individual retirement account.

Given that asset returns affect the benefits the Delta pilot group earn with an MBCBP, this plan is invested more conservatively than typical 401(k) allocations because the risk level needs to be tolerable for all Delta pilots, junior and senior. Other pilot groups, including United, have also negotiated or are in the process of negotiating MBCBPs, but those plans have yet to be implemented.

Keeping Up with the Joneses

Coming out of the recent pandemic, many airlines struggled to reestablish and maintain pilot staffing levels. With a significant pilot retirement trend already in motion and competitive contract improvements being offered at various carriers around the industry, many pilots shopped for the airline that could best meet their personal needs.

To make their carrier more competitive in this environment, the Alaska pilots negotiated a market-rate adjustment clause, sometimes referred to as a “snap up” or “me too” clause. This language, which became effective Nov. 1, 2022, was introduced to keep Alaska pilot pay rates competitive with those of their peers—as others pilot groups negotiated enhanced agreements—while maintaining the airline’s ability to attract and retain pilots.

Section 3.A.4 of the Alaska pilot contract specified that on Sept. 1, 2023, and Sept. 1, 2024, pay rates would be adjusted based on the greater of a negotiated amount or a separate total based on the average of the pilots’ peers flying B-737 MAXs and A321neos at American, Delta, JetBlue, Southwest, and United.

An August 25, 2023, article in The Seattle Times reported, “So thanks to a no-one-left-behind clause in the contract agreed to last fall, Alaska Airlines pilots on September 1 will get an 11.2 percent pay jump to keep up with wages at rival airlines, instead of the 4 percent minimum stipulated in last year’s deal.”

By comparison, Section 3-A-1-a of the most recent United Pilot Agreement requires that “If, prior to the amendable date of this agreement, Delta Air Lines current Pilot Working Agreement ‘me too’ provision is triggered by American Airlines then, on a one-time basis, the hourly pay rates for all aircraft types included in Section 3-A-1 will increase to match the percentage increase between the top United hourly rate of pay and the Delta higher hourly rate, with the same wage percentage increases in the pay tables of this agreement.”

By the end of the bargaining cycle, Delta and United achieved virtual parity in their hourly pay rates, with other carriers like Alaska and JetBlue using contractual rate adjustments to keep pace. Snap-up provisions have also been employed successfully in relation to the value of a vacation day and retirement contributions at other pilot groups.

Expanding the Meaning of Job Protection

Scope contract clauses protect jobs and careers by defining the flying to be performed by a designated pilot group. Until recently, scope clauses primarily outlined the flying that would be conducted for a given airline brand between its mainline and regional carriers. However, the industry is changing, compelling scope language to be reexamined.

A founding member of the SkyTeam Alliance, Delta has negotiated numerous code-share and joint-venture agreements with international partners, including such airlines as Air France-KLM and Korean Air. These arrangements allow Delta to sell seats on other carriers and, ultimately, provide passengers with a more extensive list of destinations.

To ensure the Delta pilots don’t lose control of the flying that’s contractually theirs, they negotiated a Global Scope Agreement to guarantee the pilot group receives an equal share of long-haul widebody flying alongside Delta’s global partners.

Global Scope LOA 23-02, which became effective Jan. 1, 2023, specifies that flying is measured in block hours and that “Delta global flying” must match no less than one block hour for every block hour its global partners collectively add in defined flying. This language ensures that as alliances are established, Delta pilots will perform half of the flying created, which equates to more Delta widebody flying, more upward mobility for Delta pilots, and more higher-paying jobs.

These examples provide a glimpse of just some of the ways ALPA pilot negotiators, assigned labor relations counselors, and Economic & Financial Analysis experts are revisiting pilot labor contracts to find new streams of value and compensation for Association members. While these examples primarily apply to the union’s “Group A” pilots in the United States, the vast majority of ALPA’s members fall under this category, and many Association pilots will transition to this group sometime during their airline careers. Aside from the retirement options geared to pilots operating in the United States, the compensation and job-security achievements can be deployed in Canada and among non-Group A pilots.

It’s been said that success isn’t an activity but a process. With the continued collaboration, information sharing, and out-of-the-box thinking of ALPA pilots and staff, moving forward, the Association will undoubtedly create new opportunities for contract growth and find new sources of value for the union’s members.