Southwest Airlines seeks historic cuts from unions as it tries to avoid layoffs

Oct 5, 2020

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Southwest Airlines will approach its labor unions for concessions for the first time in its nearly five-decade history as air travel remains at 1970s levels due to the coronavirus pandemic.

In a video message to staff on Monday, CEO Gary Kelly said the “time has arrived” for Southwest to begin discussions with its labor unions regarding concessions. The cuts are needed to forestall what are expected to be “billions” of dollars in quarterly losses until a COVID-19 vaccine is widely available.

“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,” said Kelly. Southwest has notably not posted an annual loss since  1972.

Want more airline-specific news? Sign up for TPG’s free new biweekly Aviation newsletter!

In addition to any labor concessions, Kelly will forgo his salary through the end of 2021 and all senior executives will take a 20% pay cut.

The cost-cutting moves follow the failure of Congress to extend payroll assistance by the Oct. 1 deadline. Since the expiration of protections under the federal coronavirus aid package, or CARES Act, at least 40,000 airline workers have been furloughed to laid off.

The Senate has adjourned through Oct. 19, seeming to put any possible action at least two weeks off — and two weeks before the presidential election.

Southwest already has committed to not furloughing staff before Jan. 1, 2021 — a promise Kelly reiterated on Monday. Barring either retroactive action by Congress, labor concessions or a sudden recovery in air travel, furloughs may be necessary, he said.

TPG Q&A: Southwest CEO Gary Kelly chats about his legacy, new cities and change fees

“We’re going to have bad times, and going to have to sacrifice in the really bad times,” said Kelly. “I’ll just remind you: this is the first time in our history this has happened. That’s a pretty darned good track record, and reason to believe, this too shall pass.”

Kelly promised to roll back any concessions if Congress reaches a deal.

Southwest has historically grown out of crises. After 9/11, it resumed its full schedule and even added Norfolk (ORF) to its map less than a month later. The recession of the early 1990s allowed it to grow in California — where it is now defending its grip with new Long Beach (LGB) and Palm Springs (PSP) flights — and push American Airlines and USAir out.

Related: Southwest Airlines could cut cities without additional coronavirus aid

But the coronavirus has proven to be by far the worst crisis airlines have ever seen — even seemingly indomitable Southwest. The airline has cut flying from its schedule since the summer peak and just slashed its November schedule by about 30 points to down 38% compared to 2019, according to Cirium schedule data.

The airlines plans to add three cities — Miami (MIA), Palm Springs and Steamboat Springs, Colorado (HDN) — this winter, more an effort to diversify its revenue streams than actual expansion.

“[The] outlook has actually gotten darker — something I would not have believed possible just a few months ago,” Alexandre de Juniac, director general of the trade group the International Air Transport Association (IATA), said about the outlook for air travel on Sept. 29. The organization  does not expect a full recovery until at least 2024.

Related: Airlines are flying some unexpected routes during the pandemic. Will they stick around?

Featured image by John Gress Media Inc/Shutterstock.

Delta SkyMiles® Platinum American Express Card

Earn 90,000 bonus miles after you spend $3,000 in purchases on your new Card in your first 3 months. Offer ends 8/3/2022.

With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.

Apply Now
More Things to Know
  • Limited Time Offer: Earn 90,000 bonus miles after you spend $3,000 in purchases on your new Card in your first 3 months. Offer ends 8/3/2022.
  • Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs up to two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
  • Earn 3X Miles on Delta purchases and purchases made directly with hotels.
  • Earn 2X Miles at restaurants worldwide including takeout and delivery in the U.S., and at U.S. supermarkets.
  • Earn 1X Miles on all other eligible purchases.
  • Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. Payment of the government imposed taxes and fees of no more than $80 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
  • Enjoy your first checked bag free on Delta flights.
  • Fee Credit for Global Entry or TSA PreCheck® after you apply through any Authorized Enrollment Provider. If approved for Global Entry, at no additional charge, you will receive access to TSA PreCheck.
  • Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
  • No Foreign Transaction Fees.
  • $250 Annual Fee.
  • Terms Apply.
  • See Rates & Fees
Regular APR
17.24%-26.24% Variable
Annual Fee
Balance Transfer Fee
Recommended Credit
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.