Southwest Airlines Seeks Company-Wide Pay Cuts To Stave Off Furloughs

Southwest Airlines will seek a round of pay cuts from its labor unions as part of a push to reduce costs enough to avoid involuntary furloughs through the end of 2021.

In an Oct. 5 company-wide memo, Southwest president and CEO Gary Kelly reported that management had decided to approach labor union leaders for concessions, which he said will be needed to avoid potential furloughs or layoffs beginning early next year.

Kelly said furloughs will be a “last resort” should negotiators fail to quickly reach agreement on “reasonable concessions,” adding that management’s goal is to have cost-savings in place for all employee workgroups by Jan. 1.

“We don’t have time for long, drawn-out, complex negotiations ... We need to move quickly,” Kelly said.

Southwest has committed to avoid pay cuts and furloughs through the end of the year, boosted by its solid balance sheet and strong participation in its voluntary separation and extended time-off programs. Still, the Dallas-based LCC continued to burn through approximately $17 million per day in the 2020 third quarter, and with traffic levels still down close to 70% from last year’s benchmark, management has warned furloughs may be inevitable unless expenses can be reduced further.

The proposed pay cuts come less than a week after the expiration of the U.S. Government’s Payroll Support Program (PSP), which funded most airline labor costs between April and October. Kelly pledged that all concessions agreed to by staff would be “discontinued or reversed” should Congress approve a last-minute extension of the program, echoing similar commitments from carriers like American Airlines and United Airlines, which both furloughed large numbers of employees on Oct. 1.  

“We had hoped the federal government would again move swiftly, but they have not, and that is disappointing,” Kelly said. “We’ve lobbied hard and have tremendous support for extending PSP, so it’s frustrating we have yet to see legislative action.”

House Speaker Nancy Pelosi (D-California) pledged on Oct. 2 that targeted relief for airlines is “imminent,” which she said would either be achieved through a larger stimulus package or a standalone bill. Despite those assurances, however, ongoing negotiations between Pelosi and Treasury Secretary Steven Mnuchin remain inconclusive, while an effort to pass a standalone bill, led by House Transportation Committee Chairman Peter DeFazio (D-Oregon), was blocked on procedural grounds Oct. 2. 

The White House’s announcement Oct. 6 that it will cut-off COVID-19 relief negotiations with Democrats, promising a relief package after the Nov. 3 U.S. election, appears to have scuttled any hope for federal aid for the near future.