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Striking pilots may crimp Amazon’s and DHL’s holiday package deliveries

November 22, 2016 12:35 PM
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(Bloomberg)—ABX Air, which flies packages for Amazon.com Inc. and DHL Worldwide Express, asked a federal judge to force striking pilots back to work and thwart a threat to disrupt deliveries during the holiday shopping season..

About 250 pilots employed by ABX Air, a subsidiary of Air Transport Services Group Inc., are striking to protest alleged staffing shortages at the cargo carrier. ABX Air operates 35 flights a day for Amazon, No. 1 in the Internet Retailer 2016 Top 500 Guide, and 45 daily flights for DHL, according to the Airline Professionals Association, Teamsters Local 1224, which represents the pilots. Some flights were grounded.

The action comes as the retail industry gears up for its busiest period and shoppers increasingly shun bricks-and-mortar stores and shop from their phones and computers instead. Online spending in November and December will increase 11% this year to $91.6 billion, according to an October forecast from Adobe Systems Inc.

“While they go through this court process, planes are not flying,” said Satish Jindel, president of SJ Consulting Group. “Obviously that is of concern to a company like DHL and Amazon.” But he said Amazon can shift some volume to United Parcel Service Inc. and FedEx Corp. and can also find some smaller contract parcel shippers to move packages if needed.

The pilots are picketing outside ABX Air’s headquarters in Wilmington, Ohio, and DHL’s North American hub at Cincinnati/Northern Kentucky International Airport.

The union says ABX Air is violating its contract by forcing pilots to work an excessive number of emergency assignments—preventing them from taking time off—because it doesn’t have enough pilots to meet the growing demands of companies like Amazon. The world’s biggest online retailer in March announced plans to lease 20 Boeing 767 freighters from ATSG to help it move inventory around the country.

Amazon said in an emailed statement that it works with a variety of carriers and is confident in its ability to serve customers. DHL said by email that “due to a work stoppage affecting our airline partners, inbound deliveries to portions of the Americas will be delayed today.”

Pilot strikes in the U.S. are rare due to the Railway Labor Act, a 90-year-old federal law intended to prevent labor disputes from disrupting commerce. And when strikes do occur they often don’t last very long because the company can ask a judge to intervene with a temporary restraining order until the court decides if the strike is legal. On rare occasions, if a dispute substantially threatens essential transportation in the country, the U.S. president could get involved.

ABX filed a lawsuit in federal court in Cincinnati on Tuesday seeking an order forcing the striking pilots to return to work while negotiations are ongoing, saying the Christmas shopping and shipping seasons "could be severely impacted" if flights carrying freight for DHL and Amazon are canceled and millions of dollars worth of freight and packages go undelivered. The airline lost a similar effort earlier this month to prevent the pilots from taking labor action, including strikes..

“Hopefully, sane minds will prevail and we’ll get things back to normal operations today,” said Quint Turner, chief financial officer for ABX parent ATSG. The company’s second airline, Air Transport International, is operating and will take steps to accommodate any extra demands caused by the pilot strike, he said.

The pilots say their strike is allowed because of the contract violations, and voted to authorize a walkout in May.

“For the past two years, we’ve been warning them that they are dangerously short on pilots,” said Rick Ziebarth, 59, who’s been with ABX for 39 years. “The lifestyle of our crews have really taken a nosedive. I can’t tell you how many birthdays, anniversaries and even funerals pilots can’t attend as a result of these emergency assignments.”

Pilots on Amazon runs fly night and day from Wilmington to Dallas to Stockton, Calif., to Rockford, Ill., and back to Wilmington—sometimes with nowhere to rest but the cockpit, Ziebarth said. Such routes can increase fatigue because of rotations between night and day, he said. Pilots are willing to make accommodations for customers but want the company to abide by its contract by honoring vacation time and regulating emergency assignments, he said.

Amazon’s air cargo operation is part of efforts to reduce its dependence on UPS and FedEx, as it expands a $99-a-year Prime membership service that can deliver orders in as little as a day. In addition to ATSG, Amazon in May entered into an agreement with Atlas Air Worldwide Holdings Inc. to acquire and operate 20 Boeing Co. 767-300 freighters.

A dedicated fleet helps Amazon shuffle inventory around the country more efficiently to meet demand spikes, while reducing the inventory it has to carry nationally.

The ABX strike underscores how a national pilot shortage could hinder Amazon’s air cargo aspirations. Its logistics partners have to compete for pilots with UPS, FedEx and passenger carriers that pay better wages and offer better benefits. That’s a different game than filling warehouses with temporary workers because pilots require years of training, especially for big aircraft, said Matt Barton, an aviation industry economist with FlightPath Economics in Golden, Colo.

“I don’t think Amazon has encountered a problem like the pilot shortage before and it doesn’t have a quick and easy solution,” Barton said. “A lot of these carriers are going to have a hard time finding the pilots they need."

 

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