Amerijet International plans to furlough a number of pilots in the near future to shore up cash flow after the loss of major contracts with the U.S. Postal Service and other accounts, according to internal company communications.
The number of pilots to be suspended depends on how many pilots accept offers to work less. The Miami-based cargo airline says it needs to reduce the pilot roster in line with lower customer demand.
“If we do not have enough volunteers or an increase in business, we will be announcing furloughs in late May for a June reduction,” said Chief Operating Officer Craig Bentley in an April 23 memo addressed to pilots and obtained by FreightWaves.
How many pilots could be affected by the workforce reductions is unclear. Amerijet has about 260 pilots on its rolls. Last year the Air Line Pilots Association’s website said there were 272 pilots. Pilots on chat boards and in interviews suggest Amerijet has a surplus of about 50 pilots. The roster has been declining because dozens of pilots have left in the past year to work for other airlines or retire at the same time Amerijet is not hiring.
After few, if any, crew members agreed to take vacation or otherwise cut their work hours, Amerijet is asking them to take unpaid leave or agree to a one-month-on/one-month-off schedule, Bentley informed crew members on April 18. Final details had to be worked out with the Air Line Pilots Association before Wednesday’s message was issued.
Experts in airline industry labor relations say furlough candidates will come from the bottom of the seniority list. They will retain some benefits and be the first called back when the company starts rehiring. Under a new collective bargaining agreement signed last summer, pilots are guaranteed a minimum of 74 paid hours even if they don’t fly that much.
A series of cutbacks since early 2023 has not offset a sharp loss in business for the Miami-based cargo airline caused by the intersection of management missteps with a 16-month market contraction that stung the entire industry. Small and midtier carriers, like Amerijet, have not had as much financial flexibility to ride out the down cycle.
The airline’s load factor, a measure of how full planes are, hit a three-year low of 29% in January. Cargo-revenue ton miles, which combines weight and distance pricing elements, fell 23.5% in 2023, according to the U.S. Bureau of Transportation Statistics. Amerijet currently employs about 887 people, down from a high of nearly 1,100 at the end of 2022 and 950 in January.
Downward spiral
Airfreight volumes are finally on the road to recovery in many global markets, but Amerijet’s situation has gotten worse with the recent loss of key customer accounts, forcing the company to downsize further and refocus on its core scheduled service in the Caribbean and Latin America.
Amerijet is taking steps to address the pilot surplus after the U.S. Postal Service canceled contracts for three of four routes, which reduced monthly flight activity by 700 hours and the need for three Boeing 767 aircraft, Bentley said in last week’s memo.
“Our company must adapt quickly to the changing market conditions,” he wrote. “It is not our intention or strategy to contract. However, we have to align our operations in the interim to the current conditions while we source and onboard new opportunities.”
Two of the discontinued Postal Service routes connected Philadelphia to Sacramento and Ontario, California. The agency has not disclosed if the air cargo contracts have been awarded to another carrier. Since 2001 it has shifted regional air volume to less costly ground transportation as part of a transformation initiative designed to increase efficiency and save billions of dollars. But transcontinental lanes are areas where air cargo is still likely to be utilized because of the distance involved.
Meanwhile, DHL Express has terminated long-term assignments to operate shuttle flights in its package network and reclaimed Boeing 767 freighters it lent Amerijet to operate on its behalf, FreightWaves previously reported.
Amerijet also eliminated about 10 nonpilot positions in the past week, including in the flight operations department, according to two sources with intimate knowledge about the company who asked not to be identified to protect against potential retaliation.
An Amerijet spokesperson did not respond by publication time to a request for additional details.
The company has been in turmoil for years. The arrival of ex-Air Canada executive Tim Strauss as CEO three and half years ago divided many of the legacy staff who bristled at his management style and outside hires, many with backgrounds at passenger airlines.
Motivated by skyrocketing airfreight demand during the pandemic and a desire to move up from a small regional operator to a midsize global carrier, management significantly expanded its fleet and entered new markets. But expansion coincided with a freight recession, meaning costs were rising as the company faced diminishing demand. A lengthy delay getting six Boeing 757 converted freighters certified and added to the fleet, partly due to internal compliance problems, proved costly when the planes were inactive but still required monthly lease payments.
Steps to slow the hemorrhaging, including closing a small freight forwarding unit and offshoring accounting functions, culminated with Strauss’ termination in October and a January restructuring that resulted in the return of the six Boeing 757s to lessors and new investors putting up $55 million to support ongoing operations. In March, Chief Commercial Officer Eric Wilson was dismissed.
Amerijet, as previously reported, lost $33 million in the 12 months ending Sept. 30, according to a U.S. Department of Transportation airline database.
Aircraft tracking sites show Amerijet’s fleet, once as high as 22 aircraft, is down to 13 Boeing 767s. That’s one fewer than measured in early March, possibly related to DHL’s reclaiming one of its aircraft. Of the 13 freighters operated by Amerijet, three are owned and provided by customer Maersk Air Cargo.
Shrinking puts more pressure on an airline’s unit costs and makes it hard to return to profitability. Costs go up with a smaller fleet as aircraft age and require more maintenance without the benefit of spreading fixed costs across new jets coming online. Also, the workforce gets more senior and more expensive without cheaper new employees lowering average costs.
On the positive side, Amerijet’s revenue per block hour for the core business — regional scheduled service — has increased by double digits in the past year, and the company in March added 20 block hours per week to meet demand, Bentley told the pilots. He also said the airline is capturing significant amounts of flower business from Colombia and recently booked 50 extra trips to move flowers to the U.S. market ahead of Mother’s Day.
One pilot who spoke on condition of anonymity said his trips to Colombia this spring are much higher than usual because the flower business is so brisk.
Click here for more FreightWaves stories by Eric Kulisch.
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