Fed Ex Threatens 777F Cancelations

FedEx said that it will cancel 15 firm orders for 777Fs if a proposed US House of Representatives bill that calls for the delivery giant to be governed by the National Labor Relations Act rather than the Railway Labor Act becomes law.

FedEx will begin taking delivery of 15 777Fs in September and those deliveries are not in jeopardy. But earlier this year it exercised options on 15 additional 777Fs valued at $3.75 billion, bringing its firm backlog for the type to 30, and took options on an another 15. It said that its agreement with Boeing contains a clause that allows it to cancel the order if its labor status is changed.

FAA reauthorization legislation cleared by the House Transportation and Infrastructure Committee, already controversial because it seeks to sunset airline alliances' antitrust immunity every three years, includes a provision that would switch FedEx from the RLA to the NLRA.

Since FedEx was founded as an airline in 1971, it has fallen under the jurisdiction of the RLA, which forces railway and airline workers to go through a long arbitration process before taking work actions and bars the formation of localized unions. Rival UPS, considered a trucking company, falls under the NLRA, which allows workers to organize on a local level and has fewer barriers to work actions.

UPS long has lobbied for a change in FedEx's status. The International Brotherhood of Teamsters, which represents truck drivers and other workers at UPS, also has pushed for the change so it can unionize FedEx workers. Currently only FedEx pilots are unionized.

FedEx said the change would create "upheaval" and that it no longer would be able to afford the additional 777Fs, "30 out of 45 airplanes we won't be buying if our RLA status is changed by Congress," a company spokesperson told Reuters yesterday.

Avondale Partners analyst Donald Broughton wrote in a research note that "thousands of jobs" at Boeing and GE could be affected if FedEx were to cancel its 777F order. "We find it more than a bit intriguing that now congressmen will have to vote against Boeing, GE and the creation of thousands of unionized jobs for machinists. . .in order to change the labor law status of FedEx in an attempt to possibly help the Teamsters union," he commented.

Boeing has taken no official position on the legislative proposal. House Transportation Committee Chairman James Oberstar (D-Minn.), who spearheaded the FAA reauthorization bill, dismissed FedEx's statements as "huffing and puffing."

(Air Transport World - ATWOnline)