MIAMI- After implementing no furloughs for nearly five-decade history, Southwest Airlines (WN) now seeks to make concessions with labor unions for the first time. Thus, it is trying to avoid layoffs amid substantial losses due to the pandemic.
In a video message to staff, WN CEO, Gary Kelly announced the decision as the time for tough measures has arrived. According to the CEO, the cuts are needed to face the expected billions of dollars in quarterly losses. The severance decision takes into consideration the time until an effective COVID-19 vaccine is widely available.
Since 1972, the airline has not posted a notable annual loss. Now, a negative summer season in 2020 has worsened WN’s balance sheet. Therefore, the flight cuts will continue through November with a down of 38% compared to the same period in 2019, as shown in Cirium’s schedule data for the airline.
Taking into account the current situation at WN, Kelly quit his salary through the end of 2021. Additionally, WN’s senior executives will experience a 20% pay cut. So far, WN and Kelly also committed to no layoffs before January 1.
By mid-2020, WN’s scenario looked optimistic. In July, 28% of staff agreed to take temporary or permanent leaves and Kelly stated that layoffs and benefit cuts were not expected by the end of the year.
Hanging on Congress Extending Support
“We’re going to have bad times, and going to have to sacrifice in the really bad times,” said Kelly. Despite the carrier weathering out several crises, the failure of Congress to extend payroll assistance by October 1 had a major repercussion for US airlines.
Without the granted protections under the CARES Act, not only WN but other airlines will face a tremendous number of furloughs. However, Kelly promised to roll back any concessions if Congress reaches a deal. So far, the Senate has postponed a decision until October 19, on the eve of the US presidential elections.
Featured photo: Southwest Airlines staff. Photo: Southwest Airlines.