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American Airlines' (AAL) 4-Year Pact With Pilots Is Ratified

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American Airlines (AAL - Free Report) received encouraging tidings on the labor front when the company’s pilots, represented by Allied Pilots Association or APA, approved a four-year deal pertaining to wage increase.  We remind investors that the tentative agreement between APA and AAL was reached on Aug 1.

Evidently, APA represents 15,000 pilots of American Airlines. In the entire exercise, 95% pilots participated with 72.7% casting their votes in favor of the deal. Voting on the issue had been in progress since Aug 7.

The approval makes AAL’s pilots eligible for an immediate pay raise in excess of 21% on average. Also, the deal includes provisions aimed at improving pilots’ quality of life. In fact, improvements pertaining to quality of life represent nearly 20% of the increased value of the new contract.

The approval implies that company contributions to retirement plans will increase. The four-year contract boosts the overall compensation of AAL pilots by more than 46% over its duration, is valued at $9.6 billion. The contract becomes amendable on Aug 1, 2027 and includes a provision that the next round of bargaining can begin as soon as November 2026.

Expressing delight on the development, the union’s president Ed Sicher said, “This contract is a big first step toward restoring the wages, benefits, and work rules that were lost during the past two decades while our profession was under continuous assault."  AAL’s CEO Robert Isom believes that the approval allows AAL to expand its pilot training and provide pilots with more opportunities pertaining to their career advancement.

The approval at AAL, currently carrying a Zacks Rank #3 (Hold), has not come without hurdles. In November 2022, AAL pilots had turned down an offer as they did not find the features satisfactory enough to meet their expectations. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

With U.S. airlines grappling with pilot shortage, the bargaining power of this group has naturally increased as air-travel demand is buoyant, having bounced back very strongly from the pandemic lows. Last month, United Airlines’ (UAL - Free Report) pilots provisionally agreed on a $10 billion contract to increase their pay up to 40% over the four-year duration of the contract. In March, Delta Air Lines’ (DAL - Free Report) pilots ratified a four-year deal, which made DAL’s 15,0000 pilots eligible for a 34% pay-hike over the next four years.


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