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FedEx's (FDX) Pilots Vote Against Provisional Agreement

Zacks Equity Research
·3-min read

FedEx Corporation’s FDX pilots have rejected a tentative agreement with the company, with 57% voting against it and 43% in favor. Following the result, the leadership of the Air Line Pilots Association or ALPA, representing the company’s pilots, will regroup and prepare for the next step. Captain Chris Norman, FedEx ALPA chair, stated that they would assess pilot group priorities to find a new path that can lead to an agreement that all FedEx pilots will support.

We remind investors that in June, the FedEx Master Executive Council, the governing body of the FedEx unit of ALPA approved a tentative agreement, reached on May 30, with FedEx management.  However, the deal fell through due to the adverse outcome of the ratification voting procedure.

The deal was regarding major pension improvements with alternative pension options, significant hourly pay rate increases, an amendable period recovery payment and other improvements to pilots’ quality of life. However, the rejection implies that the features failed to meet the pilots’ expectations. In view of the staff shortage in the transportation sector, the bargaining power of various labor groups has naturally increased as air travel demand is bouncing back strongly from the pandemic lows.

The rejection of the tentative agreement by the pilots may have a potential impact on FedEx's stock. Labor disputes and the inability to reach an agreement with pilots can create uncertainty and instability within the company. Investors may perceive this development as a negative sign, as it could potentially lead to disruptions in operations and increased costs if further negotiations and potential labor actions take place.

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The National Mediation Board's involvement in convening a status conference may further prolong the resolution process. Delays in reaching a new agreement with pilots could hinder the company's ability to implement its operational and financial strategies effectively.

On the other hand, if the company can swiftly address the concerns raised by the pilots and come to a revised agreement that satisfies both parties, it could restore confidence among investors. Whatever the outcome, investors are likely to closely monitor the situation as to how the matter eventually unfolds in the coming weeks, as it could significantly impact FedEx's performance and stock performance in the near term.

Zacks Rank & Key Picks

FedEx currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings CPA and Allegiant Travel Company ALGT. Both stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Copa Holdings is aided by improved air travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive.

Copa has a stellar record with respect to earnings surprise. CPA outshined the Zacks Consensus Estimate for earnings in each of the past four quarters, with the average beat being 14.6%.

Allegiant is seeing a steady recovery in air travel demand. In first-quarter 2023, operating revenues grew 29.9% on a year-over-year basis.

ALGT has a strong liquidity position. Cash and cash equivalents of $317.6 million at first-quarter 2023 end were higher than the current debt of $289.7 million. This implies that the company has enough cash to meet its debt burden.The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 14.8% upward over the past 60 days.

Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.

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FedEx Corporation (FDX) : Free Stock Analysis Report

Copa Holdings, S.A. (CPA) : Free Stock Analysis Report

Allegiant Travel Company (ALGT) : Free Stock Analysis Report

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