SEATTLE/LOS ANGELES--Santa's sleigh cannot fly without its pilot.
With the peak holiday shipping season fast-approaching, global package delivery giant FedEx Corp is paying retirement-age pilots bonuses of $40,000 - and potentially as much as $110,000 - to keep them flying into next year, according to two sources with knowledge of the matter and a contract seen by Reuters.
The bonuses, outlined in the latest pilot contract and previously unreported, reveal that a wave of pilot retirements, global pilot shortages and rising cargo demand fueled by the growth of global e-commerce are straining the world's largest air delivery fleet. Any problem in maintaining capacity for FedEx, which many economists consider a barometer of U.S. economic strength, disrupts supply chains at a time when they are already being destabilized by international trade tensions.
FedEx and rival United Parcel Service Inc, which is trying to recruit hundreds of pilots this year but is not paying bonuses, play a crucial role in global supply chains from aerospace to retail, particularly during the holidays when average daily delivery volumes can double.
FedEx spokeswoman Bonny Harrison declined to comment on pilot pay or its use of bonuses to manage the timing of retirements. She did point to details of a pilot recruitment campaign it launched publicly in April and said FedEx had about 5,000 aviators on its payroll.
"FedEx Express is well staffed with pilots at this time, however we're always looking toward the future," Harrison said.
Two senior FedEx managers familiar with the strategy told Reuters the company offered cash bonuses to retain retiring pilots through the holiday shipping surge that stretches from the U.S. Thanksgiving holiday in November through year-end.
FedEx and UPS had record holiday peak business in 2016 and 2017, and plan to hire a total of 155,000 temporary workers for the peak season to help to deliver products bought from retailers like Amazon.com Inc, Walmart Inc and Best Buy Co Inc to consumers' doorsteps. The National Retail Federation expects 2018 U.S. holiday retail sales in November and December to increase as much as 4.8 percent to $720.89 billion compared with a year ago.
FedEx expects to lose about 150-200 of its roughly 5,000 pilots this year - and around the same number annually for the foreseeable future - as more approach age 65, the federally mandated pilot retirement age, one of the sources said.
The FedEx pilot contract seen by Reuters, signed in late 2015, includes a calculation that allows for bonuses of up to $110,000 per pilot. The two sources told Reuters they were aware of pilots collecting bonuses this year of $40,000 to $50,000, though the total number of payouts was unclear.
These bonuses are calculated based on a portion of a pilot's salary over the 24 months prior to his or her retirement date, the contract says. To get the bonus, a pilot has to provide at least 12 months' notice of the day he or she will retire on Dec. 31 of a given future year.
Flying for FedEx is the highest-paying job among U.S. carriers, with 30-year pilots making roughly $300,000 not counting overtime or bonuses, industry sources said.
