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Friday, June 15, 2007

FedEx to Base Pilots Overseas

FedEx Corp. plans to establish pilot bases in Paris and Hong Kong, saving it the cost of getting U.S.-based pilots to work and giving it more flexibility as it takes on DHL, the No. 1 courier company in Europe.
The Memphis-based company and the pilots' union are discussing an amendment to the pilots' contract, including cost-of-living stipends and details about the planes FedEx intends to fly in each market.

"We've had very cordial dialogue with the company," said David Webb, chairman of the FedEx master executive council of the Air Line Pilots Association.

"We've had ongoing trips to Asia to look at housing, schools and hospitals. These two domiciles are going to be important to the future growth of Federal Express," he said.
The conversations, Webb said, have been going on for years.

He expects FedEx would like to have pilots bid on the new routes this year.
"We're working diligently to complete the negotiations. Everyone seems to be willing to listen to each other and make the best effort to have it work out," said Maury Lane, company spokesman. "But we're in no rush because we can keep doing business the way we are."
For pilots, particularly young pilots, an overseas base can offer chances to move up the pay scale with promotions not available in larger bases. For instance, a first officer in Memphis who lacks seniority to fly in the captain's seat could be senior in a smaller domicile.

Promotion from first officer to captain normally carries a 35 percent raise. A 15-year first officer moving to the most senior captain's seat would make an added $60,000 to $70,000 a year.Traditionally, FedEx has agreed to pay moving costs to and from a domicile for pilots who stay three years.

Setting up foreign bases could save it millions in commuting costs. For instance, for June, FedEx has 31 flights to Europe to get 64 pilots in place. FedEx can expect to spend $330,000 on their tickets -- an annual rate of $3.9 million.

Figures are based on round-trip, first-class tickets that average $5,200, according to the company's flight operations Web site.When domiciles are established, pilots who choose to commute from the United States, or from anywhere else, will have to pay their own fares.
FedEx has bases in Memphis, Los Angeles, Subic Bay and Anchorage, Alaska. Memphis is the largest.

"You want to have your pilots based where the flight originates because that's where you have the longest layovers," said Satish Jindel at S J Consulting near Pittsburgh. "It gives the pilots a better quality of life and better scheduling."

The change comes as FedEx adds capacity to its fleet and prepares to open its Asian hub in Guangzhou, China, in December 2008. FedEx's Asian business is growing by double digits; growth in Europe is slightly less. Last fall, FedEx said it intended to spend $2.6 billion to buy 90 Boeing 757-200s, which it will deploy largely in Europe.

What makes the 757 attractive is that it can land anywhere FedEx now lands 727s.
The 757 can carry 20 percent more cargo and costs 25 percent less to operate than a 727, including the crew. It requires a two-person crew; the 727 requires three crew members.
That means the company can carry packages at a lower cost per package, allowing it to increase profit margins in the overnight delivery sector, still its core business.

By Jane Roberts



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