American Airlines pilots reach tentative agreement on new contract

© Reuters. FILE PHOTO: An American Airlines Airbus A321-200 plane takes off from Los Angeles International airport (LAX) in Los Angeles, California, U.S. March 28, 2018. REUTERS/Mike Blake/

By Rajesh Kumar Singh and Allison Lampert

CHICAGO (Reuters) -American Airlines pilots have agreed in principle on a new contract that boosts their pay by 21% in 2023, sources told Reuters on Friday, ahead of a busy summer travel season, after years of negotiations with the largest U.S. carrier.

The Allied Pilots Association (APA), which represents over 13,000 pilots at Texas-based American, said on Friday it will move forward with completing contractual language before presenting the contract to its board for an approval.

However, the union did not share contract details.

American did not quantify the contract value but said it provides pay and profit sharing that match the top of the industry with improved quality-of-life provisions.

Under the tentative agreement, American pilots would get a 21% pay increase in 2023, a pay increase of 5% in the second year and 4% a year during the following two years of the deal, three sources with direct knowledge of the matter said.

The sources said the contract lasts four years with pay rates comparable to those secured by pilots at Delta Air Lines (NYSE:DAL).

Pilots would also get an additional 3% raise in 2027 when the proposed contract becomes amendable, added the sources who spoke under condition of anonymity as the details are not yet public.

American's contract includes improvements on scheduling, a critical issue for pilots seeking better work-life balance in a profession that often requires them to be away for days from their families, they said.

The previous contract came up for renewal in 2020. Last year, the pilots turned down an offer that included a 19% pay hike over two years.

Industry officials say Delta's pilot contract has become a new benchmark for contract negotiations in North America. It is fueling demands for higher wages at Canadian carriers, whose pilots want to narrow the pay gap with their U.S. counterparts.

American had estimated that matching Delta's deal would cost it about $8 billion over four years.

Delta's pilots in March ratified their contract which includes over $7 billion in cumulative increases in pay and benefits over four years.

It underscores pilots' bargaining power as airlines rush to boost staff numbers ahead of what is shaping up to be a busy summer travel season.

American, Delta, United Airlines and Southwest Airlines (NYSE:LUV) are estimated to hire about 8,000 pilots this year.

Analysts at Jefferies estimate the United States is short about 10,000 pilots. This supply-demand gap is projected to last until 2027.