22 April 2016

[220416.EN.BIZ] UPS Pilots Plan Strike As Customer Amazon Becomes a Rival Air Carrier

THE United Parcel Service (UPS) pilots union said it is taking steps to prepare for a strike after five years of negotiations with the transport and logistics giant, reports The Street.

The Independent Pilots Association (IPA) has opened a strike operation centre at its Louisville headquarters ahead final offers on contract terms next week.

Should the management and union positions be far apart, the National Mediation Board could release the parties from mediation and start a 30-day cooling-off period before a strike would be authorised.

"After nearly five years of bargaining, which includes two years of concentrated federal mediation, it is now crunch time," said IPA president Robert Travis.

"UPS is engaged in an unnecessary and reckless game of chicken with its pilots, shareholders, and customers. We are not playing games. While we prefer a negotiated agreement, our pilots are preparing for a strike at UPS."

The UPS talks took on additional urgency in November after rival FedEx averted its own potential strike crisis by reaching a new five-year deal with its pilots.

The negotiations come at a tricky point in UPS' history, where either falling into an extended work stoppage or giving away too much to make a deal could have significant consequences for the company.

The talks have focused on flexibility, with the union seeking a lighter schedule with more breaks similar to what commercial pilots fly.

The issue of breaks and rest took on added weight after a UPS plane crash in 2013 in which a lack of sleep for the pilots was ruled a contributing factor.

UPS, meanwhile, needs to remain as flexible as possible as it deals with a host of new challenges on the horizon.

E-commerce to date has been a massive positive for the company, but Amazon's decision earlier this year to invest in an air cargo operation shows that the retailer is moving to take more control of its supply chain, a potential threat to future growth at UPS.

Morgan Stanley analyst Ravi Shanker estimated that upward of 20 per cent of UPS revenue could be at risk from the twin threats of companies like Amazon moving some of their logistics in-house, and from start-ups that are attempting to undercut incumbents on last-mile delivery.

If anything, that figure could prove conservative over time should business-to-business logistics operations eventually adopt some of the processes that Amazon are now experimenting with.

"Though this may be limited in scope to begin with, removing the most dense volumes could significantly erode the per-unit economics for the remaining B2C business at the parcels," Mr Shanker said.

Source : HKSG.

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