Southwest seeks pay cuts from unions to avoid layoffs through 2021

Business

CHICAGO – Southwest Airlines LUV.N said on Monday it is asking unions to agree to pay cuts in order to prevent furloughs and layoffs through 2021 as the industry struggles to stem losses from the coronavirus pandemic in the absence of more federal aid.

Unions represent about 83% of roughly 61,000 Southwest employees. Non-union staff salaries will be cut by 10% until Jan. 1, 2022, when they will return to the current level.

“Our objectives are to make this quick and simple and avoid furloughs,” Chief Executive Gary Kelly said in an interview.

The union representing Southwest pilots said it had tentatively agreed to meet and discuss cost savings if a second COVID-19 relief package does not pass in Washington. The flight attendants and mechanics unions did not immediately comment.

Rivals American Airlines AAL.O and United Airlines UAL.O began furloughing 32,000 employees last week when a ban on job cuts expired without another $25 billion in federal payroll support that airlines have been seeking.

Southwest, which has never furloughed any workers, has said it may have to follow suit as air travel remains down 70%.

“We would have to wipe out a large swath of salaries, wages and benefits to match the low traffic levels, to have any hope of just breaking even,” Kelly told employees, warning that quarterly losses could be in the billions until a effective vaccine is widely available.

U.S. House Speaker Nancy Pelosi on Friday said an airline deal was “imminent,” and talks with Treasury Secretary Steven Mnuchin for a broad economic stimulus package were continuing this week.

If federal aid passes, Southwest would reverse any pay cuts. Without it, cost savings must be in place for all employee groups by Jan. 1, 2021, said Kelly, who is reducing his base salary to zero through the end of 2021 and continuing a 20% cut in senior executives’ pay through next year.

Airlines including Southwest have parked jets and scaled back their flight schedules in an attempt to match 1970s levels of demand.

But with a stronger balance sheet than most rivals, Southwest is playing offense as it tries to open new routes and pick up clients in a market he expects will see “brutal low fare competition.”

“We don’t need furloughs, but we need some cost reductions,” Kelly said.