United’s CEO sees pilot deal adding over $8 billion in costs

United Airlines Holdings Inc. is offering its pilots a contract with an incremental value in excess of $8 billion over four years, a figure that would make it the richest deal ever for a mainline US carrier.

The company is negotiating weekly as it tries to reach a formal agreement with the union, Chief Executive Officer Scott Kirby said in a wide-ranging interview Monday with Bloomberg News. He didn’t detail the value of the pay, benefits and quality-of-life improvements included in the proposal other than to say that it would top the recent deals agreed to by its two biggest rivals.

“We have a deal on our table that would be industry leading,” Kirby said.

The labor talks have ratcheted up pressure on United even as it benefits from soaring demand for leisure travel and no signs of a slowdown in trips that mix personal time with work. Kirby reiterated that a “business recession” is keeping corporate travel as much as 25% below 2019 levels, but he said he expects a full recovery.

Overall demand is strong enough to withstand even a moderate recession, he said, and nothing short of an “exogenous shock” to the economy will derail it.

“It would require something pretty significant — beyond the scope of what anyone has in any other sort of base case scenario,” Kirby said.

Carriers are grappling with higher costs, particularly on the labor front. American Airlines Group Inc. reached a preliminary agreement last month that would add $8 billion in additional costs. That came a couple months after Delta Air Lines Inc.’s aviators approved a new contract with an incremental cost of more than $7 billion, also over four years.

Kirby said United has incorporated expected labor expenses into its guidance despite not having an agreement.

Pilots at United are set to vote on whether to authorize a strike, a common negotiating tactic. Such a vote doesn’t mean pilots will strike immediately, but would give union leaders approval to call for a walkout if one is authorized by the National Mediation Board. 

Despite the uncertainty, United’s shares have rallied 36% this year through Monday, the largest gain in a Standard & Poor’s index of the five largest carriers. The company’s stock climbed 1.8% at 9:35 a.m. Tuesday in New York.

Kirby also said United will not take part in any effort to reduce the requirement that most pilots have 1,500 hours of flight experience to get a license to fly large airliners. Those with military flight experience or who graduate from specific aviation schools can get licensed with fewer hours. Supporters of a push to change the rule have argued it hasn’t made flying safer and that reducing it could help address the shortage of aviators that’s plaguing the industry. 

“Trying to make complicated arguments that you can cut the number of hours and make it safer isn’t a winning argument today,” Kirby said. “So we’re not trying to change anything about the 1500-hour rule.”