To quote the late, great, fictitious engineer, Ray Arnold, in 1993 before his untimely on-screen death by dinosaur at Jurassic Park:

“Hold on to your butts.”

Remember that wave of pilot contracts just after COVID that delivered some staggering pay increases just as the acute pilot shortage was hitting its peak?

Remember how the least of our worries at the time were the future amendable dates, which would open a new wave of contract negotiations all at once?

To quote little Carol Anne Freeling in front of a static-filled television screen in 1982:

“They’re here.”

(For those not familiar with the classic lines from Samuel L. Jackson in Jurassic Park or Heather O’Rourke in the movie Poltergeist, we recommend pausing here to complete the required movie-watching prerequisits. Just don’t take too long. These pilot contracts aren’t going to negotiate themselves.)

In most of the mature aviation markets - and especially so in North America - labor remains the highest cost to airlines by a long-shot. Even with fuel hovering near $4.65 / gallon, (more than double the $2.28 / gallon from the same day last year), it remains salaries and benefits that dominate the airlines’ operating expenses.

By this time next year, 12 of 15 major pilot contracts in the U.S. and Canada will be up for negotiation. Most will be amendable from prior contracts, while both Breeze and Porter share the pleasure of negotiating their new contracts from scratch.

That’s a lot.

Now, consider where expectations lay from the last round of pilot negotiations. Completed during the race to redeploy capacity after COVID, pilot contracts saw increases of up to 30% at ratification, and total contract growth of up to almost 50% over the remaining four or five-year contract. What does that mean for this upcoming round of negotiations?

Let’s just say, expectations are high.

Those high expectations from pilot groups coming off windfall contracts, are bound to collide with airline teams staring down mounting cost pressures. And yet, those cost pressures are moving primarily on fuel today, which could just as easily drop before contract negotiations begin in earnest.

But while the price of fuel fluctuates with Hormuzian Straights and Bab-el-Mandebs, labor contracts don’t. Sans an in-court restructuring and the dreaded 1113 process, labor contracts only get more expensive over time - regardless of whether the leisure premium traveler is willing to continue to cover airline cost increases or not.

And so, we enter the next phase of this airline business cycle - and that phase probably won’t be a contract negotiation phase. It will be a time of status quo, where contracts become amendable, but airlines have little (read: no) reason to accelerate negotiations.

That likely means a new wave of picketing, union pins, and all the operational challenges that can arise from the definitely-not-a-union-sanctioned-work-slowdown-but-we’re-still-not-going-out-of-our-way-to-depart-on-time-until-you-pay-us festivities.

And so, an inbound set of dualing strategies is set to collide. From pilots looking to continue the historic gains while airlines still find profits, to airlines looking to stall as long as possible to avoid paying the higher salaries.

To quote famous ESPN8 (“The Ocho”) commentator, Pepper Brooks during the 2004 American Dodgeball Association of America International Dodgeball Open in Las Vegas:

“It’s a bold strategy, Cotton. Let’s see if it pays off for them”

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