Southwest Airlines plans to avoid airline layoffs by making pay cuts as the industry waits for federal aid from Congress.
Amidst the low travel demand caused by restrictions imposed to curb the spread of the coronavirus, Southwest Airlines has taken pride that it has never furloughed or slashed worker wage in almost 50 years of operation.
However, Southwest Airlines wants to avoid airline layoffs and announced that it is calling on labor unions to accept pay cuts. This will allow them to avoid involuntary furloughs through the end of 2021. Southwest Airlines plans to cut nonunion workers’ pay by 10%.
“It’s a shared sacrifice and this is the kind of company that I think is up for that task,” Southwest CEO Gary Kelly said during an interview on CNBC’s “Squawk Box." Kelly mentioned he is letting go of his base salary until the end of next year.
Last week, United Airlines and American Airlines have begun furloughing over 32,000 employees. According to the airlines, they will reverse this decision if carriers get more federal assistance.
US airlines have decided to not cut any jobs until Oct. 1 under the terms of $25 billion in federal funds. Southwest Airlines said no to airline layoffs or reducing worker pay through the end of 2020, and this has become possible due to thousands of employees who took buyouts or had voluntary time off.
Faced with a slow recovery, Southwest, its US rivals and labor unions are calling on Congress and the White House to provide $25 billion in additional federal assistance to keep payrolls, generally carriers’ biggest expense.
“Obviously, any reasonable person realizes this is a huge crisis not just for the airlines but for the country,” Kelly told CNBC.
Kelly said on Monday that he wants to present cost-saving agreements with unions by Jan. 1, and furloughs will be a “last resort" if they do not come up with deals.
The pay cuts at Southwest Airlines would be reversed if Congress releases additional airline payroll support, Kelly said.
“TWU Local 556, the union of Southwest Airlines flight attendants, has made it clear to the company in previous conversations that our members are not interested in making concessions to a contract that took decades to obtain,” said Lyn Montgomery, the union’s president, in a statement.
Support for the airline industry
In August, President Donald Trump expressed his support for the release of another $25 billion in federal aid for the airline industry.
There is bipartisan support for issuing additional funds for one of the worst-hit sectors during the pandemic. US airlines previously said that the jobs of over 70,000 of their workers would be at risk when the current round of aid ends in the fall.
“I think it’s very important that we keep the airlines going,” Trump said in a White House press briefing when asked about the extension of the aid. “We don’t want to lose our airlines. If they’re looking at that, whether they’re Republican or Democrat, I’d be certainly in favor. We can’t lose our transportation system.”
In June, the International Air Transport Association (IATA) said the airline industry may lose $84 billion in 2020.
Air travel dropped by 98% in April from last year. The agency previously predicted 8.2 billion air travelers in 2037. However, the efforts made to curb the spread of the coronavirus badly hit air travel.
“We think airlines are going to probably lose an unprecedented $84 billion in 2020,” Brian Pearce, chief economist for IATA, told CNBC.
“We’re really only just starting to see countries negotiating bilateral openings of markets. For example, the Trans-Tasma bubble between Australia and New Zealand, China and Singapore, as well as China and Korea.”
