Delta gives pilots big pay raises as unions show how much power they have in negotiations.

In a new contract, Delta Air Lines is giving its pilots a 34% cumulative pay raise over three years. This shows how much power aviators have in a short-staffed industry with a growing demand for travel.

If Delta pilots agree to the deal, it is likely that United Airlines and American Airlines will use it as a model for their own contract talks (NASDAQ: AAL).

A draught contract seen by Reuters says that Delta pilots will get a raise of at least 18% when the contract is signed, 5% after one year, 4% after two years, and 4% after three years.

After the deal is signed, they will also get a one-time payment equal to 22% of their earnings between 2020 and 2022.

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The Atlanta-based airline’s pilots have been working without a new contract since December 2019, when their old one could be changed. This has made them angry.

In October, they voted by a large majority to let them go on strike if they couldn’t agree on a new contract.

HIGHER FARES, HIGHER MOUNTING COSTS

The big pay raises are likely to make cost pressures even worse for carriers at a time when worries about a U.S. recession are making people nervous about spending.

Investors worry that travel demand could drop, which would make it harder for an industry with a lot of debt to fix its balance sheet. Ticket sales are still good. They are worried that carriers might have to borrow even more money to keep running.

But the rush by airlines to hire more people to meet growing customer demand has given pilots more power in negotiations. Now that the industry is making money again, pilots say airlines should pay them more to cover their higher living costs.

So far, airlines have relied on strong demand and higher prices to keep inflation from getting out of hand. Customers can expect ticket prices to go up if they have to pay more for their workers.

In the draught agreement, Delta says that its pilots will be paid at least 1% more than those at United and America.

In a memo to its members, the Delta pilots’ union said that the deal will add more than $7.2 billion to the value of the company over the next four years.

Delta said it is “pleased to have reached an agreement in principle for a new pilot contract” that “recognises the contributions of our pilots to Delta’s success.”

Pilots at all of the major U.S. airlines have been protesting for a year, asking for higher pay and a better balance between work and life.

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On Thursday, a lot of United pilots protested outside of Chicago’s O’Hare airport. They wanted a contract that was “industry-leading.” Last month, they turned down an offer that would have raised their pay by more than 14.5% over time and given them more money for overtime and training.

American pilots also turned down a plan to raise their pay by 19% over two years. This would have cost the Texas-based airline $2 billion.

Pilots also want a better standard of living. They say that problems with staffing and operations at carriers are making them work more hours and leaving them tired.

Delta’s pilot union said in a memo that more than 25% of the value of the contract agreement is for things that improve the quality of life.

The proposed deal also includes 10 weeks of paid maternity leave, 2 weeks of paid parental leave, and lower health insurance premiums.