Southwest Airlines is asking worker unions to accept pay cuts so the company can avoid furloughs through the end of the year.
Southwest CEO Gary Kelly noted that his goal is still to have no involuntary pay reductions or layoffs in 2020 but that the company has decided to approach union representatives for concessions.
“My goal has been and it remains — no furloughs. If we fail to reach agreement on reasonable concessions — quickly — that will have to be the last resort. We simply don’t have time for long, drawn-out, complex negotiations. I’ve instructed our Company’s Labor Team to take a simple approach,” Kelly said in a video message on Monday.
He announced that, effective Jan. 1, he will reduce all leadership groups’ base salaries by 10 percent until January 2022 and that the airline will “pursue a similar approach” for all other non-union employees.
“Salaries, wages, and benefits are far and away our largest cost item. 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.
He said it is “disappointing” and “frustrating” that Congress hasn’t extended the airline Payroll Support Program (PSP), which allocated $25 billion in aid as part of the $2.2 trillion CARES Act passed in March.
Kelly said that if Congress acts and extended the PSP, these pay-cut efforts will be discontinued or reversed. American Airlines and United Airlines also have said that if Congress acts, their employee furloughs will be reversed.
“In the meantime, our country needs us to keep flying, which means we keep burning cash every day. Since the PSP has now expired, we simply cannot afford to continue with the conditions required to maintain full pay and employment,” Kelly said.
He added that his already-reduced base salary will be zero through the end of 2021. The board of directors’ fees and most senior executives’ base pay have also already been reduced to 20 percent, which will continue until the end of 2021.
“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’s looking like late next year,” he said.
House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-Ore.) unsuccessfully attempted to pass a stand-alone bill that would extend the PSP by six months on Friday.
Earlier on Friday, Speaker Nancy Pelosi (D-Calif.) told airlines to hold off on the furloughs because Congress would either pass DeFazio’s stand-alone legislation or relief would come in the form of a negotiated bill.
The House passing another $2.2 trillion coronavirus aid package last week that has been rejected by the White House and Republicans in the Senate. It included $25 billion to extend the PSP.
Pelosi has pressed forward with COVID-19 relief talks with Treasury Secretary Steven Mnuchin for weeks, but no agreement has been announced.