1998 Red Letter ... Could it Happen Again?
INTER-OFFICE MEMORANDUM
Date: November 17, 1998 TO: All FedEx Pilots
From: Frederick W. Smith
Subject: Strike Threat
I am writing to express my extreme disappointment with the actions of the Fedex Pilots Association. The threat of a pilot strike against our customers by FPA has seriously jeopardized our outstanding reputation for reliability and customer service, helped our competitors, and resulted in additional, and unnecessary, operational costs.
For over twenty-five years I have watched with great pride as the employees of FedEx have changed the way the world works. Throughout this Company's existence, its outstanding reputation has never been tarnished in any significant way, except now by the actions of your union.
In 1993 a majority of the pilots elected to withdraw from the People-Service-Profit System and to be represented by a union. That is your legal right, and FedEx has scrupulously honored your decision. FedEx has conscientiously negotiated to develop a contract which fairly compensates the pilot group, but which also recognizes the needs of our customers, our other employees, and our shareowners. On two separate occasions, FedEx has reached an agreement with your legal representatives, only to have both agreements rejected. Some in the pilot group succeeded in defeating both of those agreements with innuendo and distortion. Those actions denied you improvements that would have long since enhanced your compensation and benefits.
You recently have placed your career in the hands of an FPA leadership which has adopted a negotiating strategy which reflects 1) little or no business experience, 2) a poor understanding of the customers and markets which FedEx serves, 3) no analytical capabilities to evaluate negotiating demands, 4) totally unrealistic expectations given the competitive realities of the express market, and 5) an erroneous comparison of pilot issues at FedEx with those at passenger airlines. Additionally, this approach has repeatedly - and deliberately - misrepresented to you, the customers, and the public, the Company's positions throughout this negotiating process.
FedEx has been willing in the past, as demonstrated by our having reached two separate agreements, to improve pilot compensation and benefits in a fair and equitable manner. As an example, FedEx provided an independent analysis of the last offer presented to FPA the week ending October 30th which showed that proposal would have placed FedEx pilots in the top tier of the transport industry. This offer was rejected and FPA demanded over $400 million more! Acceding to these demands would have been imprudent from a business standpoint and manifestly unfair to other employees.
Since that rejection and in order to protect our customers, our other employees and the interests of our shareowners, we have been forced to find ways to continue to operate the system by contracting for a considerable amount of additional transport capabilities, both air and ground. Our customers are already committing an increasing amount of business to our competitors and our wonderful business reputation is being tarnished. Our competitors are making every effort to take advantage of the situation. For example, UPS distributed the following message last week to our customers:
UPS has additional air and ground capacity that can be used to accommodate the needs of domestic and international shippers who may be seeking alternatives in light of the labor situation at Federal Express.
Make no mistake; the Company's offer of October 30th is no longer valid. It is too expensive in view of the contingency plans we have been forced to implement. Moreover, I want you to understand clearly that FedEx has the capability and resolve to compete effectively in the event of a pilot strike and, if necessary, to restructure our aviation operations.
Contracts for supplemental transport aircraft, and other contracts consummated due to the strike threats of FPA, will be honored with the resultant loss of thousands of flying hours for FedEx pilots. Potential fleet additions have been substantially reduced recognizing diminished growth prospects as a result of FPA's actions.
Respecting your decision to be represented by a union, I have not addressed the pilot group directly in many years. I make this exception only to ensure there is no misunderstanding on the part of any FedEx pilot as to the future course of action we will pursue. I regret that there are many fine pilots who are committed to serving our customers and deserving of enhancements to their pay and benefits, but who have not enjoyed those enhancements due to the failed ratification of the previous agreements. I trust whatever career decision you and your family make will therefore have been made with a clear view of the consequences.
In the event of a strike, I will ensure that all available company resources are deployed to protect any pilots who decide to fly for the Company and that FedEx is supplied with sufficient resources reasonably necessary to operate its contingency plans during any strike. When and as appropriate, the details of the arrangements to be made will be communicated to you. Safety, teamwork, and reliability will remain the focus of all pilots operating FedEx aircraft. Accordingly, no intimidation or physical threat to any pilots will be tolerated in the short or long term. Detailed and comprehensive security plans are in place to ensure this.
Let me reiterate that safety must be the number one issue for all FedEx pilots regardless of these unfortunate developments. Flight management will therefore ensure that discussions about politics and economics always remain off our aircraft.
I express again my disappointment with this state of affairs, but I want you to know that our Board of Directors, our senior management team, our other employees, our major shareowners, and the vast majority of our large customers are absolutely resolute on this matter. I think you will also find in the weeks to come, as the other employees deal with the consequences of your actions, there will be unwavering dedication to serving our customers and rebuilding FedEx in the future with or without you.
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