FedEx says Boeing orders depend on Congress

NEW YORK (Reuters) - FedEx Corp will cancel an order to buy 15 Boeing Co jets, as well as an option for a further 15 planes, if Congress passes legislation that makes it easier for FedEx workers to organize under labor unions.

A FedEx plane sits on the tarmac at Logan International Airport in Boston, June 18, 2008. REUTERS/Brian Snyder

At issue is whether FedEx loses its status under the jurisdiction of the Railway Labor Act, which protects companies from local labor action.

FedEx expects to take delivery of 15 Boeing jets starting this year under an existing contract, spokesman Maury Lane told Reuters. But “30 out of 45 airplanes we won’t be buying if our RLA Status is changed by Congress.”

The portion of the Boeing order that FedEx cannot cancel totals $2.5 billion, according to a FedEx regulatory filing.

In January, the company exercised an option with Boeing to purchase 15 additional 777 aircraft, and it has an option for another 15 planes. At list prices, 30 such jets are worth about $7.5 billion to Boeing.

The Boeing contract includes language that enables FedEx to cancel the order and the option, if the company’s FedEx Express employees are no longer covered by the Railway Labor Act (RLA), which covers airlines as well as railroads.

“We will look very hard on how to move FedEx forward with a new regulatory environment,” Lane said.


Asked if he expected Boeing’s support on Capitol Hill, Lane said: “They understand the issues related to these airplanes, they know that if RLA is changed, then we won’t buy these additional aircraft.”

Boeing has not taken a position on the legislation.

The world’s second-biggest airplane maker said the 15-plane order it lists as firm in its backlog is unaffected by the language in the contract.

“It remains firm and deliveries will begin in September,” said spokesman Jim Proulx.

The labor issue has simmered for a dozen years but Republicans, considered pro-business, ran Congress and the White House for much of that time, ensuring no action. But pro-labor Democrats are emboldened with their party in power.

The FedEx threat is unlikely to prompt House Transportation Committee Chairman James Oberstar, who authored the measure in this year’s aviation bill, to change his position.

“His feeling is FedEx is going to do what’s right for FedEx,” said Jim Berard, a spokesman for the Minnesota Democrat. “If that means buying more airplanes, they’ll buy more airplanes. It’s got nothing to do with this legislation.”


U.S. Congress is weighing a bill that would place the company under the jurisdiction of the National Labor Relations Act (NLRA), which would make it easier for workers to strike.

Under the NLRA, workers may organize by individual terminals while the RLA requires a more difficult path to unionization that requires a national vote by every worker at FedEx Express, according to the Teamsters union.

The threat to pull the Boeing contract is “another attempt by FedEx to deny its workers the right to organize,” the Teamsters said in a statement emailed to Reuters.

Boeing is likely to “aggressively lobby Congress” to keep FedEx under the RLA, while rival United Parcel Service Inc will lobby for a change in status, said Helane Becker, transportation analyst with Jesup & Lamont.

“UPS would like to have a more level playing field,” Becker said. “FedEx has an advantage being nonunion.”

UPS is heavily unionized, while at FedEx only the pilots are union members, she said. Becker added that FedEx, which began as an airline and flies more planes than any other carrier, will likely prevail and remain under the RLA.

FedEx shares were down $1.09, or 2.5 percent, at $42.33 in afternoon trading, while UPS gained 5 cents to $47.25 and Boeing shares rose 12 cents to $36.23, all on the New York Stock Exchange.

Additional reporting by Kyle Peterson in Chicago and John Crawley in Washington; Editing by Brian Moss and Matthew Lewis, Gary Hill