Fractionals react to new NetJets contract

 - September 26, 2006, 10:13 AM

It’s no secret that the NetJets pilot contract ratified in late November raised the bar for fractional pilot pay. Within hours of the tentative agreement’s release in early October, speculation began about when pilots at the other major fractionals would get an equivalent raise.

For CitationShares pilots, an answer came quickly, with the fractional provider announcing that as of January 1, it was increasing wages above those specified in the NetJets contract. But those flying for Flight Options and Bombardier Flexjet have received only assurances that their companies are evaluating pilot wage scales.

CitationShares’ pilot-pay increase wasn’t a knee-jerk reaction to the NetJets contract, according to J.D. Witzig, the company’s v-p of flight operations and chief pilot. In fact, Witzig said, management at the Greenwich, Conn.-based fractional provider agreed to the higher wages in the summer and announced them to the pilot group in October. He added that it was pure coincidence that CitationShares’ announcement came about the same time that NetJets reached a tentative agreement with its pilots.

“It’s very important that we retain and attract the best pilots,” Witzig told AIN. “…Our pilots enjoy a very competitive wage and benefit compensation package.”

Under CitationShares’ new-pilot wage scale, first officers will start at $40,000– versus $39,000 at NetJets–and first-year captains will make $64,000, well above NetJets’ $52,000. However, the NetJets captain pay is more closely aligned with that of CitationShares after the second year.

While CitationShares took a proactive approach to pilot pay, managements at Flight Options and Flexjet were largely silent on the matter until the middle of last month. And the messages that the Flight Options and Flexjet pilots received probably weren’t quite what they were hoping for.

In a written statement, Flexjet v-p of operations David Gross said, “As it does every year, Flexjet is in the process of evaluating its employment compensation programs with the goal of remaining competitive in our segment and providing competitive wages and benefits to our valued employees. This evaluation includes benchmarking compensation against not only the fractional aircraft segment but the entire aviation industry…We are aware of the NetJets agreement and, as would be expected, will include it in our competitive assessment.”

A Flight Options spokesman wouldn’t comment about what the fractional provider will do about pilot wages. However, AIN obtained a copy of a December 9 memo sent by v-p of operations Bob Tyler to the company’s pilots and flight attendants that addresses the subject.

It reads, “In flight operations a number of initiatives are being actively pursued. Each has only one goal: to provide the quality-of-life improvements we all deserve while remaining committed to our go-forward business plan. Specifically, we are working to find a balance of competitive compensation, a more reasonable domicile policy, productive scheduling and responsible benefits that still allow the company to have a sustainable business model.

“For years we’ve prided ourselves as being among the highest paid, most professional crewmembers in the fractional industry,” the Flight Options memo continues. “Yet recent NetJets and CitationShares pay changes caught up and in many cases exceed our current pay rates. Word on the street is Flexjet remains undecided how to react. Some Wall Street analysts can’t figure out how the fractional business model that’s been unprofitable to date can take on additional debt.

“It’s been said that all boats rise on the incoming tide. It’s essential to keep pace with our competition but we simply must remain true to our business plan that provides security and sustainability for all of us. We hope to have everything firmed up in the next few weeks.”

Wall Street analysts estimate that Flight Options lost $80 million last year alone. Further, industry sources said only about 40 percent of the shareowner contracts at Flight Options have a clause allowing management fees to be increased to raise pilot wages. Given this information, the Cleveland-based company might have no choice but to leave its pilot pay levels unchanged.

On the other hand, Flexjet has said it made money last year (though without saying exactly how much), so it might be hard for the Dallas-based fractional provider to justify not increasing its pilot payscale. However, the company did claim it’s barely making a profit, perhaps implying that any increase in pilot pay would be nominal.

That said, managements’ noncommittal statements about any pay increases have again raised the possibility of pilots’ unions at both Flexjet and Flight Options, especially given IBT Local 1108’s recent success with the NetJets pilot contract. Additionally, there is much talk among pilots of a mass exodus for the higher-paying jobs at NetJets and CitationShares.

Last month, several Flexjet pilots contacted IBT Local 1108 about setting up a union-organizing committee. A previous organizing drive at this fractional provider lost traction in fall 2003, when pilot-management relations were mended without the need for a union. Since the latest Flexjet union drive is in its infancy, it’s too early to predict its success or failure.

But the union-organizing drive at Flight Options is much more advanced. The Flight Options pilot behind the union drive told AIN that nearly 65 percent of his colleagues had sent an organizing card to IBT Local 1108 by mid-December. He believed that the 65 percent needed to call a vote would be reached by January 1, thanks in part to Tyler’s letter to the pilots.

The pilot concluded, “With the 90-day election window that the National Mediation Board sets, this means we could have a union vote by the first of April. Support is very strong [among Flight Options pilots], and I believe the final vote will return more than 60 percent for a union.”