Zacks Equity Research
Fri, September 1, 2023
Per a Reuters report, United Parcel Service UPS has offered early retirement to some pilots. The move is aimed to reduce labor costs as the package delivery firm struggles with a decline in demand scenario. The weak freight market has hurt overall volumes.
At present, UPS employs around 3,400 pilots. The company expects 167 pilots to accept this voluntary retirement offer. The separation scheme is quite lucrative as it includes cash as well as healthcare-related benefits. This is, in fact, the first time since 2010 that UPS has decided to reduce employments of its pilots. In 2010, UPS had furloughed 109 pilots, per the report mentioned above.
We remind investors that in August, while releasing second-quarter 2023 results, management trimmed its current-year revenue outlook. UPS now expects 2023 revenues to be around $93 billion (prior view: $97 billion). Management cited costs associated with the labor deal, inked with 330,000 unionized workers, and declining package volumes induced by labor negotiations as reasons for lowering the outlook.
Due to these headwinds, UPS shares have declined 2.6% year to date compared with its industry’s 10.3% growth.
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UPS currently carries a Zacks Rank #4 (Sell).
UPS offers senior pilots buyout package to cut costs
Eric Kulisch
Thu, August 31, 2023
UPS is gradually removing MD-11 aircraft (pictured) from its fleet because they are expensive to operate. (Photo: Jim Allen/FreightWaves)
UPS Inc. is offering pilots an early retirement package to reduce payroll amid declining package volumes.
The integrated parcel and logistics giant confirmed Thursday it wants to trim senior pilots from its ranks, a day after communicating with the pilot group.
“At UPS, we regularly assess our operations and make adjustments to better serve our customers. As part of our effort to efficiently manage our airline, we are offering a voluntary separation benefit to eligible UPS pilots,” UPS (NYSE: UPS) said in an emailed statement. “Those who choose to accept the offer will receive a comprehensive compensation package that includes cash and healthcare benefits.”
UPS did not disclose specific details of the offer.
UPS reduced its flight activity in July by 14% from the prior month, and flight hours were down 13% year over year, according to tracking data compiled by Morgan Stanley.
UPS reported second-quarter domestic next-day air revenue fell 9.4% on a 12% drop in volume. Management attributed a large chunk of the domestic decline to customers trading down to UPS’ lower-cost ground network.
Within the United States, UPS is adjusting package flows to maximize utilization of Next Day Air flights, which enables it to reduce block hours — time in flight and taxiing at the airport — in the two-day operation. By filling overnight flights from its Worldport hub in Louisville, Kentucky, it has reduced the need to operate as many daytime flights. CFO Brian Newman said the changes resulted in domestic flight hours that were 6.5% lower versus the 2022 quarter.
UPS began retiring its fleet of older MD-11 aircraft in January. A total of 42 tri-jet freighters will be discharged over the next few years and replaced by 28 new Boeing 767 medium widebody aircraft, the first six of which are scheduled for delivery this year. The 767s offer lower operating costs, with better reliability and fewer emissions.
Louisville TV station WDRB was first to report the UPS effort to downsize crew levels at its cargo airline. It said UPS wants to eliminate 167 pilots.
The last time UPS downsized its pilot workforce in 2010, it furloughed 109 pilots.
It’s unclear how many long-tenured, senior captains there are at UPS Airlines who qualify for the offer.
FreightWaves/American Shipper
Eric Kulisch
Thu, August 31, 2023
UPS is gradually removing MD-11 aircraft (pictured) from its fleet because they are expensive to operate. (Photo: Jim Allen/FreightWaves)
UPS Inc. is offering pilots an early retirement package to reduce payroll amid declining package volumes.
The integrated parcel and logistics giant confirmed Thursday it wants to trim senior pilots from its ranks, a day after communicating with the pilot group.
“At UPS, we regularly assess our operations and make adjustments to better serve our customers. As part of our effort to efficiently manage our airline, we are offering a voluntary separation benefit to eligible UPS pilots,” UPS (NYSE: UPS) said in an emailed statement. “Those who choose to accept the offer will receive a comprehensive compensation package that includes cash and healthcare benefits.”
UPS did not disclose specific details of the offer.
UPS reduced its flight activity in July by 14% from the prior month, and flight hours were down 13% year over year, according to tracking data compiled by Morgan Stanley.
UPS reported second-quarter domestic next-day air revenue fell 9.4% on a 12% drop in volume. Management attributed a large chunk of the domestic decline to customers trading down to UPS’ lower-cost ground network.
Within the United States, UPS is adjusting package flows to maximize utilization of Next Day Air flights, which enables it to reduce block hours — time in flight and taxiing at the airport — in the two-day operation. By filling overnight flights from its Worldport hub in Louisville, Kentucky, it has reduced the need to operate as many daytime flights. CFO Brian Newman said the changes resulted in domestic flight hours that were 6.5% lower versus the 2022 quarter.
UPS began retiring its fleet of older MD-11 aircraft in January. A total of 42 tri-jet freighters will be discharged over the next few years and replaced by 28 new Boeing 767 medium widebody aircraft, the first six of which are scheduled for delivery this year. The 767s offer lower operating costs, with better reliability and fewer emissions.
Louisville TV station WDRB was first to report the UPS effort to downsize crew levels at its cargo airline. It said UPS wants to eliminate 167 pilots.
The last time UPS downsized its pilot workforce in 2010, it furloughed 109 pilots.
It’s unclear how many long-tenured, senior captains there are at UPS Airlines who qualify for the offer.
FreightWaves/American Shipper
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