When Mike Griffith, a career pilot, learned last year that his company Atlas Air signed a big contract to fly for Amazon’s Prime Air program, he was ecstatic to take part in what he believed to be the future of logistics.
Twelve months later, Griffith’s excitement has turned to angst. Dozens of his colleagues have fled for higher pay and better benefits elsewhere, whether cargo operations like UPS or commercial airlines like Delta.
Griffith, 52, is so concerned about his company’s ability to hold up its end of the Amazon deal that he’s heading to Seattle for its shareholders meeting on Tuesday. Griffith will be picketing along with about 50 other pilots from Atlas and air cargo conglomerate Air Transport Services Group (ATSG), which also has a contract with Amazon.
“Shareholders are being sold a bill of goods by vendors saying that they can bring in labor at below-market rates and make it successful,” Griffith said in an interview on Friday from his home in Los Angeles. “We’re seeing record attrition.”
Griffith said that a report released internally showed that Atlas lost 92 pilots in the first four months of the year, double the number it lost in all of 2016.
Last week, the International Brotherhood of Teamsters, which represents pilots at Atlas and ATSG, sent a letter to Amazon’s board expressing concern that “our employers, in their efforts to contain costs, will hamper Prime Air’s growth and ultimately force Amazon to reconsider the strategic development of Prime Air.”
Ken Hall, the union’s general secretary-treasurer, said in the letter that he welcomes a meeting with Amazon executives to discuss the problem and potential solutions.
Amazon investors have reason to care. The company is trying to build out an end-to-end supply chain to control every aspect of freight delivery and storage as it aims to provide even faster service to Prime members. As Amazon sees it, Prime Air will eventually mean drone delivery to your door.
For now, it’s about airplanes. Last year, Amazon agreed to lease 20 planes each, including crew, maintenance and insurance, from Atlas and ATSG, with operations expected to be fully up and running by 2018.
Additionally, Amazon acquired warrants to buy up to 20 percent of each carrier over a five-year period. As of Friday’s close, 20 percent of the two companies had a total value of $516 million. At Atlas, the stake could eventually increase to 30 percent.
The pilots are taking the case straight to Amazon, because they say their own executives won’t talk to them and contract negotiations are at a standstill. They want Jeff Bezos to use his clout to put pressure on the carriers before it’s too late.
“Everyone wants the company they work at to be a success,” said Griffith, who’s worked at Atlas for 19 years. “That flows to better contracts in the future, more work and continuous work.”
An Atlas spokeswoman said in an email that the company is meeting all of its customer commitments and will continue to do so. The company had 1,700 pilots at the end of 2016, an increase of 600 over a two-year span. In complaining about employee churn, the pilots and union are attempting to pressure the company in contract negotiations, she said.
“We remain committed to negotiating a competitive, single-collective-bargaining agreement in accordance with the terms of our existing labor agreements, which recognizes our pilots’ valued contributions,” she said.
An ATSG representative said the company’s airlines have “had no attrition issues, nor have they had a problem attracting new hires.” All but two of the aircraft in the Amazon contract have been delivered and the other two are scheduled in coming months.
“We have complete confidence in our ability to fulfill the terms of our contracts,” the spokesman said.
According to the letter from the Teamsters to Amazon, Atlas and ATSG pay their pilots 50 to 60 percent below the prevailing market rate. On top of that, Griffith said his employer has no retirement benefits apart from a basic 401(k) plan.
While cost-cutting was the name of the game for many years, the trend has changed now that carriers are facing a severe pilot shortage. Delta agreed to give its pilots a 30 percent raise by 2019, and American Airlines said last month that pilots are being offered 8 percent midcontract raises. United also bolstered its pay.
The industry has an even bigger shortage problem ahead. The Teamsters’ letter to Amazon said that 35 percent of current U.S. pilots are likely to retire over the next 10 years and that demand will outstrip supply by up to 15 percent. Amazon is currently partnering with companies on the wrong side of the market, the letter said.
“Career destination airlines are having little trouble staffing their operations and fulfilling commitments to customers, while all other air carriers have become a revolving door,” the union wrote. “Pilots enter and then rapidly exit the business, creating massive training and staffing difficulties — not to mention added costs — which impede these air carriers’ ability to deliver on customer expectations.”
An Amazon spokesman said that while questions about the working environments of particular partners are best answered by them, “we are pleased with our partners’ performance and their continued ability to scale for our customers.”