Southwest Air targets pay cuts in bid to avert layoffs

Bloomberg

Southwest Airlines Co will seek to cut employee compensation in a last-ditch effort to avoid the first involuntary layoffs in the company’s 49-year history.
The company wants to have givebacks in place by January 1, CEO Gary Kelly told employees in a video message, warning that “we all need to sacrifice more.” Kelly won’t receive a salary through the end of 2021. And 20% pay cuts for senior executives will continue next year as the company contends with a travel collapse caused by the coronavirus pandemic.
“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 said. “Absent substantial improvements in our business, our quarterly losses could be in the billions until vaccines are available, distributed, and effectively kill the pandemic — and at best that is looking like late next year.”
Kelly delivered the warning as House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continue to negotiate a broad economic relief plan that would include $25 billion in payroll support for passenger carriers — a six-month extension of an earlier aid package that expired on September 30. Southwest would abandon efforts to cut pay if the government provides additional help, Kelly said, adding that he has “not given up hope” for the extra aid.
US carriers have furloughed about 38,000 since October 1, including major layoffs at American Airlines Group Inc and United Airlines Holdings Inc. Those cuts followed the departure of 150,000 who left airlines voluntarily or accepted leave.
Southwest’s pilots union said it recognised “the seriousness of the situation we are in” and said it would meet with management. “However, agreeing to discussions is very different than agreeing to concessions,” the union said in a statement, warning that there were limits to how much the company could cut costs “on the backs of labour.”
Employee costs jockey with fuel as the largest expense for airlines, and Southwest has warned since April that plummeting demand might force it to seek labor concessions or end its streak of avoiding layoffs and pay cuts. Southwest has received nearly $3.4 billion in federal payroll support. The company had $14.5 billion in cash and short-term investments at the end of June.