News / Atlas Air shareholders approve Amazon deal despite fears of pilots and ground crew

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Atlas Air’s deal with Amazon is set to go ahead after shareholders voted overwhelmingly in favour – despite a plea from pilots for greater scrutiny of the contract.

In a special meeting yesterday, a proposal to issue new shares was approved, triggering a “change of control” at the company.

Shareholders had received a letter on behalf of the airline’s 1,600 pilots outlining their concerns over the deal.

With the main risks of the Amazon operation falling onto Atlas, which needs to source and operate 20 767Fs, the pilots said they were worried that “the Amazon transaction will overwhelm and destabilise” operations.

They urged shareholders to postpone the decision to “enable AAWW management to conduct the necessary, comprehensive and far more transparent due diligence investigation that is sorely lacking today”.

The deal with Amazon gives the e-tailer the right to dry-lease 20 B767Fs from Atlas subsidiary Titan and receive aircraft operation (CMI) services from Atlas, but the internet giant may cancel the CMI deal with just 180 days’ notice merely for the sake of “convenience”, which can be implemented from January 1, 2018.

Atlas is expected to spend some $500m on aircraft alone, with the first set to start operating this quarter.

There is also considerable concern that Atlas will not be able to source sufficient pilots for the new operation, in part owing to a pilot shortage and also due to poor relations between pilots and Atlas management.

“We estimate that only half of Atlas Air’s new hires stay for more than a year,” noted the letter.

“We also estimate that Atlas Air’s current attrition rate is nearly 20% and that Southern Air’s attrition rate is even worse. With the company’s refusal to sign a fair labour contract with its pilots, hiring prospects for Atlas Air and Southern Air are looking dim.

Citing recent fines for inadequate maintenance and the antitrust case, the pilots added: “History has shown that AAWW tends to present a rose-coloured picture to shareholders, while leaving critical details in the dark…It seems these fiascos can in part be attributed to AAWW’s preoccupation with stressing transactions’ financial gains, while disregarding the risks.”

The letter follows a complaint from Atlas ground crew, which wrote to the US Department of Transportation expressing concern that major customer, and 49% shareholder of subsidiary Polar, DHL has effective control over Atlas, which would be illegal under US airline ownership laws.

It said that DHL has a “forceful authority”, and that all the metrics for staff are provided by DHL. They also outline safety concerns, and conclude: “The DoT and FAA need to reassess Atlas’s Air Fitness Certificate and the influence of DHL, a foreign entity.”

Both the ground crew and pilots also cite high pay rates for the top management. The ground crew claim that if they fail to meet DHL targets, the top brass – but no one else – continue to receive bonuses. The pilots have expressed their concern over “exceedingly generous compensation packages” if the shareholders voted through the Amazon proposals.

It appears, according to an SEC filing, that following the vote in favour of the Atlas deal, the top executives appear set to gain additional payments of between $165,000 and $260,000 immediately – a “small” amount, according to one.

CEO Bill Flynn wins a different, substantial, package of about $12m, as part of his retirement deal, as he nears the age. The vote also triggers the payout of all outstanding performance awards at the maximum amount, worth millions of dollars, albeit at a later date.

In separate news, Atlas is due to start twice-weekly fifth freedom freighter services between Hong Kong and Doha before October 20. The service was reallocated from an existing traffic right which allowed Atlas to fly Hong Kong to Ciudad Del Esta, Paraguay, and Hong Kong to Sharjah. It may not fly those routes once it has begun its Qatar service.