American Airlines warns of higher third-quarter cost from new pilot contract

(Reuters) -American Airlines warned on Tuesday it was expecting higher costs in the third quarter following a new labor deal with its pilots that included more than $9.6 billion in total pay and benefits increases over four years.

The company’s pilots approved a new contract on Monday that also had provisions for retroactive pay for the first four months of 2023, leading to $230 million in added expense that will be reflected in the third-quarter results.

Continued strength in travel demand has provided pilots an upper hand in contract talks and bolstered their bargaining power as airlines rush to staff up and expand capacity.

Rival United Airlines too had last month announced a preliminary deal for a new four-year contract that would give its pilots a cumulative increase of 34.5%-40.2% in pay.

American Airlines now expects its cost per available seat mile excluding fuel and net special items to rise about 4% to 6%, compared with a prior forecast of about 2% to 4% growth.

Its contract includes about $1.1 billion in immediate, one-time payments and ratification bonuses.

The company reaffirmed its annual cost outlook, mainly due to changes in the anticipated timing of other expenses.

(Reporting by Shivansh Tiwary in Bengaluru; Editing by Anil D’Silva and Arun Koyyur)