Catalogers Seek Alternatives if FedEx Pilots Strike

Direct marketers are putting together alternate shipping plans as a possible Federal Express pilot strike threatens to wreak havoc on the holidays. A strike could occur as early as Dec. 3.

Companies haven't seen any change in service yet, but FedEx pilots are no longer working voluntary overtime because of a failure to reach a contract agreement.

“It's in the percolating stage,” said Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association. “We spoke to some of our major catalog mailers that use FedEx and found that they are starting to look at some contingency plans.”

FedEx pilots were mailed strike ballots last week. The union needs a two-thirds vote before it can call a strike. Concerns are escalating so much that the White House issued a statement last week expressing its hopes that a settlement can be reached.

Meanwhile, catalogers L.L. Bean, Freeport, ME, and Cabela, Sidney, NE, are looking elsewhere for service.

“Our contingency plan right now is to use United Parcel Service,” said Kurt Kravchuk, corporate logistics manager at Cabela, which uses FedEx for 80 percent of its foreign package shipping, specifically to Japan. “We have a tentative agreement right now with UPS to ship packages, [but] it will hurt us in the short term with rates.”

Kravchuk said he is discouraged because he hasn't received any updates from FedEx.

“When UPS was about to go on strike, we had information on a daily basis,” said Kravchuk, who doesn't plan to switch Cabela's international deliveries to UPS from FedEx for good.

L.L. Bean spokesman Richard Donaldson said 2 percent to 5 percent of its volume goes overnight with FedEx. The cataloger could see some delays in shipping to the West Coast because it uses FedEx exclusively to fly packages there.

“For those shipments, instead of going by land to Memphis and then flying out to the West Coast, [FedEx may send these packages] out by land to the West Coast,” he said. “These packages may be delayed by a day or two, but we anticipate that we will have a plan in place to deliver overnight if it needs to be there.”

Catalog consultant Bill Dean of W.A. Dean & Associates, San Francisco, said it's still too early for many catalogers to think about a possible strike.

“Every time I see a mention of it in the paper, I still can't believe that [FedEx] is going to let a strike occur. They are going to be the Grinch that ruined Christmas.”

The strike won't ruin UPS' Christmas. The Atlanta-based shipper is seeing an increase in its air business, said spokesman Norman Black.

“We are telling people that if they are concerned about the labor situation at Federal Express, we do have additional air and ground capacity if they come to us early enough,” he said, “but we are always going to protect our existing customers first.”

Federal Express Corp., a subsidiary of FDX Corp., Memphis, has outlined preliminary plans, including reconfiguring its domestic air system around nonstriking FedEx pilots who would be supplemented by contract pilots; expanding its ground operations; and using contract airlift to operate its international air network. The company would not disclose how many trucks or planes it will add or the names of the companies it is contracting with.

FedEx 2Day and FedEx Express Saver — its three-day delivery service — will be unchanged, FedEx couriers will continue to pick up and deliver packages, and its 43,000 drop-off locations will be open and fully operational. However, the plans for its most popular service — domestic overnight delivery service — are still being finalized, including what areas will be served, which delivery commitments will be made and which features of service will be continued or discontinued. In addition, a day will be tagged onto FedEx's International Priority delivery and the company may stop offering some services, such as FedEx First Overnight, Dangerous Goods service and Saturday and Sunday pickup/delivery.

“These are just contingency plans,” said spokeswoman Carla Boyd, “but we'll do everything we can to take care of our customers regardless of further job action threats by the FedEx Pilots Association.”

The pilots association, Memphis, TN, with 3,595 members making up 90 percent of FedEx's pilots, said that if the contingency plans were enacted, it would negatively affect FedEx's reputation.

“We are hoping that we will reach a settlement before they feel they have to execute those contingency plans,” said spokesman Bob Clement. “If the plans are true, they are giving up about a $10 million differential for a major restructuring of FedEx. We've been told repeatedly [by FedEx] that if they use contract employees such as contract pilots, reliability will go and cost is higher. They could not maintain their reliability and on-time performance.”

The contract struggle focuses on salaries and job security. FedEx says its pilots make an average of $142,000 a year, though the union contends that figure is inflated with overtime pay. The company has offered a 17-percent raise over five years. The union wants 5 percent retroactive to a negotiated date and 19 percent more over four years.

The National Mediation Board, which is assisting the negotiations, said last week that it was briefed by representatives from both sides and that it is “evaluating the potential cost and impact of the dispute.”

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