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Labor Rates Rising, UPS, Teamsters Disagree on Health Coverage

Issue proving a sticking point in reaching agreement.

There’s not much doubt that mechanics’ wages are going to rise to retain and attract sufficient talent. The latest U.S. Labor Department figures report aircraft repair costs went up 3.1% in the 12 months to August 2017. With engine part prices flat over the same period, and non-engine parts actually declining 0.1%, that implies a 5-7% increase in labor rates.

But that’s not the current impasse at UPS. “Other large airlines have dramatically increased mechanics’ wages and benefits in recent years . . . in a tightening labor market, where technically skilled workers are in short supply,” notes Tim Boyle, president of Teamsters Local 2727, which represents 1,300 mechanics and related workers at UPS. “In its current round of contract negotiations, UPS is attempting to trade higher wages for dramatically reduced healthcare and retirement benefits for its technicians.”

Boyle argues that won’t work. “Today’s market and future is anything but a business-as-usual environment for skilled aircraft technicians.” He thinks the company is risking its ability to support its fleet “as the labor market for technically skilled and qualified employees continues to tighten.”

The Teamsters and UPS have reached agreement on nearly all other areas of their contract. Boyle says, “once this issue on healthcare is settled, the union is confident that the remaining areas in dispute, such as wages and pension, can be resolved.”

UPS takes a slightly different view. It is happy that the National Mediation Board will continue to mediate negotiations. The company says it has offered the Teamsters two options that contain significant gains in total compensation for mechanics. These offers include what UPS calls “industry-leading wage rates, pension and 401(k) programs,” and the choice of premium-free healthcare or remaining in the current health plan with cost-sharing.

There is reason to believe UPS mechanics will do well, however the negotiations turn out. UPS’s global air hub in Louisville, Kentucky, is just 100 miles away from Delta Air Lines’ hub and Private Jets MRO Center in Cincinnati. The Cincinnati area had the highest average mechanic wages in the country in 2016, $37.36 per hour and $77,700 per year. Competition not too far away is a nice complement to union strength and a tight labor market.

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