United Parcel Inks Tentative Five-Year Contract With Pilots

United Parcel Services or UPS (NYSE:UPS) remains on track to finalize a new labor contract with its pilots as UPS Airlines , a subsidiary of UPS, signed a new tentative agreement with Independent Pilots Association (“IPA”). The terms of the contract will remain undisclosed till it is presented to UPS pilots. The five-year contract will include improvements to enhance UPS’s competitiveness in the industry and simultaneously benefit its employees.

Contract Formation Details

The contract mediation had started in Mar 2014 and the tentative agreement was signed in the presence of the Chairman of the National Mediation Board (NMB). Most of the 2600 UPS pilots will be required to ratify the contract terms. Voting by pilots is scheduled to be completed on Aug 31 and if approved, the contract will come into effect from Sep 1, 2016. The contract can be amended after Sep 1, 2021, if approved. Notably, the tentative deal has been endorsed by IPA’s Executive Board and the Negotiating Committee.

Other Investments

UPS is a leading logistics company with a global delivery system. Therefore, labor disruptions may have a significant impact on the company’s operations and can cause revenue loss. Moreover, given that UPS is a company which is majorly reliant on its employees for efficient service provision, it is essential for it to ensure that labors and management are on agreeable terms. Last time the company faced a labor strike was in 1997 and had resulted in losses of almost $600 million.

UPS could face potential challenges in the coming months with global macroeconomic issues such as low industrial demand and issues related to the U.K.’s exit from the European Union, popularly termed “Brexit”. However, the company remains confident about its ability to grow as evidenced by its recent investment of approximately $100 million in France for building a new facility. The company also makes consistent efforts to improve labor productivity by opening new training centers for its drivers and employees.

Zacks Rank and Stocks to Consider

UPS currently holds a Zacks Rank #2 (Buy). Other stocks which investors could consider in the broader logistics sector include Grupo Aeroportuario del Pacifico (NYSE:PAC) , Navios Maritime Holdings Inc. (NYSE:NM) , and Trinity Industries, Inc. (NYSE:TRN) . All these stocks sport a Zacks Rank #1 (Strong Buy).