Federal Express and Its Pilots Are Tested in Vote Over a Union

“A Conversation with Fred Smith” may not sound very intriguing, but the videocassette is getting a lot of play in the homes of 2,000 Federal Express pilots.

The 35-minute tape featuring the Federal Express chairman is one in a series of videos that the company has sent to pilots--via Federal Express courier--in an attempt to defeat the first union drive ever at the highly successful overnight package delivery firm.

The Air Line Pilots Assn., an influential union seeking to organize the Memphis-based airline’s pilots, has fired back with its own pro-union video, an unending stream of letters and a daily postcard mailing that supplies a new reason to vote for the union.

The hard-fought union election ends today, and the outcome--which may be announced today or Friday--is significant to both the union and Federal Express.

A defeat for the union would further tarnish an image already colored by a failed attempt to organize pilots at America West, a faltering 8-month-old strike at Eastern Airlines, and the collapse of an offer to buy United Airlines’ parent company.

“ALPA hasn’t had wonderful luck lately,” said Frank A. Spencer, professor of transportation and labor relations at Northwestern University’s J. L. Kellogg Graduate School of Management, who said a win is important for the union’s morale. A victory at one of the last, large non-union carriers would also bring thousands more dues dollars ALPA’s way.

A union at Federal Express would no doubt change the informal relationship between management and the airline’s pilots, who are used to taking complaints to Smith if middle managers can’t help. The airline might also lose some of its flexibility, and that could be costly.

For example, Federal Express pilots, unrestricted by union work rules, fly more hours each month than union pilots at other airlines.

“The problem with the union efforts at Federal Express is that we’re just beyond all that ‘Hooray for me and the hell with you’ stuff,” Smith told pilots in a videotaped message. “I’m not anti-union. I’m just pro-Federal Express.”

Merger an Issue

Federal’s management views the union drive as one of the trickier problems to result from last December’s acquisition of Los Angeles-based Tiger International, the parent of Flying Tiger Line. Tiger’s pilots are long-time members of ALPA, and have led the effort to establish their union at Federal.

The union vote comes as Federal grapples with other difficulties. The merger gave Federal scores of new foreign routes that it must carefully integrate into its system while it copes with worrisome defections by former Tiger customers.

The merger-related problems were one reason Federal’s earnings dropped 54% to $30.4 million in the quarter ended Aug. 31.

On the eve of the election, people on both sides say the contest is too close to call, although one ALPA leader estimates that 40% of Federal’s pilots are “open to the concept.” There are 1,000 ex-Tiger pilots and 1,100 Federal pilots. If Tiger pilots vote as a block, only 51 Federal pilots are needed to swing the election.

Many Are Satisfied

It’s difficult to gauge how many Federal pilots want a union. They are among the best paid pilots in the industry, earning slightly less than their counterparts at Delta and United airlines. With overtime, some Federal pilots may earn as much as $200,000 a year.

Smith has earned the loyalty of many Federal workers with a no-furlough policy, unusual in an industry characterized by periodic downturns and layoffs. When Federal discontinued its ailing Zap Mail facsimile service three years ago, it found jobs for the displaced workers and absorbed the $25-million wage cost.

“It is regarded as a very good company to work for,” said Wes Powell, director of the Future Aviation Professionals of America, a group that tracks airline industry wages. Powell said some pilots don’t like certain aspects of the job, such as the night flights and unglamorous cargo. Even so, Powell says, “It’s rare to hear a complaint.”

A union leader from Tiger said that the union campaign is a difficult one, largely because Federal is a well-run company and many pilots are happy to work for it. “We’re trying to take the high road,” said union leader Frank Maguire. “We think we can make it even better.”

To make its point, ALPA took out an ad in a Memphis newspaper that called Federal a “symbol of success” and Smith “the very best of our profession.” The praise didn’t please Smith. “He said it was patronizing,” Maguire said.

Clearly, many workers are happy. One group of Federal pilots, called Union Free Organization, or the UFOs, handed Smith a petition saying they were opposed to any union. The petition was said to have more than 150 names.

But some Federal pilots are angry over the way the merger with Flying Tiger was handled. Instead of moving Tiger pilots to the back of the seniority list as promised, management decided to combine the two groups. The action means some plum assignments will go to Tiger pilots, and that Federal pilots might not move up the ranks as quickly as they had expected.

One Federal pilot, Richard Sowers, sued the company contending that the decision to combine the work crews violates his employment contract. Sowers contends that a document called the flight crew-members handbook says any pilots acquired in a merger would be added to the bottom of the list.

A second suit filed by Sowers contends that the company improperly revised the handbook to allow the company to combine the pilot groups. A company spokesman had no comment on the suits.

In any merger, seniority issues are tricky. It took Northwest and Republic pilots two years to agree on how they would work together, though both pilot groups were members of ALPA. The controversial Federal seniority list is in arbitration. Even so, some Federal pilots think they would have fared better with a union.

“We’re a bigger company now,” said John Poeg, a Federal pilot who tried to form a separate union at Tiger and now supports ALPA.

Federal has grown quickly, and its success as an overnight package carrier is legend. When Smith returned from Vietnam in 1969, the Marine fighter pilot turned his attention to an idea he developed while a student at Yale. Two years later, with $72 million in venture capital, Smith put together a cargo delivery network with trucks and planes and guaranteed overnight delivery. With the Tiger merger, Federal is a huge company, with outposts in 109 countries, and revenue around $6 billion.

Many Federal pilots take pride in their company.

By contrast, Tiger pilots worked for a company hampered by losses and shrinking market share. Those pilots are used to squaring off with management and have brought their feistiness with them to Federal. Three years ago, Tiger pilots resisted wage cuts until Tiger’s management threatened to shut the airline down and sell it off in pieces. Only then did the pilots agree to whopping 30% wage cuts.

At Federal Express, the ex-Tiger pilots haven’t shied from confrontation. The pilots flatly rejected a company proposal that gave management authority to fire them at will. And the pilots have challenged their new bosses with a lawsuit over pension plan changes.

In his videotape to pilots, Smith said he was “incredulous” about the suit because Tiger’s pension plan had a $25-million shortfall. “It’s hard to understand the value of preserving something under-funded to that degree.”

Maguire says the issues involved in the suits are minor, and that the company is blowing them out of proportion to make ALPA look overly aggressive. “It’s nothing that comes as a surprise,” he said. “Each side believes it has the better answer.”