As there is no further federal aid provided to the airlines. Southwest Airlines chief announces that they will have management pay cuts. Moreover, he will seek to negotiate concessions from workers to avoid layoffs.
However, he believes the airline can navigate the crisis without layoffs. But the rivals Southwest, American, and United Airlines have warned that 32,000 employees would collectively lose jobs. Congress was not able to agree on the new relief package.
Cost Cutting Plans
However, airlines are struggling and cutting costs after the federal aid stimulus ran out last week. Congress provided $50 billion in relief to airlines during the pandemic as there was a drop in passenger numbers. Kelly said Southwest’s revenue remains 70% below what it normally would be.
However, the House of Representatives passed a new $2.2 trillion relief measure favoured by Democrats last week. But the GOP-led Senate was not taking it up. House Speaker Nancy Pelosi, D-Calif., has been in talks with Treasury Secretary Steven Mnuchin and it is still uncertain whether a separate bill to aid the airlines, a strategy that the White House is in favor of, can be hammered out.
Kelly said Southwest must plan for cost reductions. As there are no signs of further federal help comes through. He invoked the airline’s maverick history and noted that labor is the highest area of cost.
“We have a clear way to do all of this without layoffs or furloughs. At least through the end of next year,” he said in a video message to the workforce. “As usual, we’re different from the other airlines.”
However, he also mentioned that he will work without his base salary through the end of next year. Moreover, managers and the board of directors will also take pay cuts.
Dealing With the Unions
But when the airlines have to deal with the unions. Especially those representing pilots and flight attendants, Kelly said he needs to have cost cuts in place by January 1.
“We simply do not have time for long, complex, drawn-out negotiations. We need to move quickly and have cost savings in place,” he said. Furloughs would only be a “last resort” if they do not reach an agreement.
In a note to its members, Southwest’s pilots’ union said it hasn’t received answers to multiple requests for information from the company that would be helpful as a basis of whether to accept concessions.
The union, the Southwest Airlines Pilots Association, also said its members have given up $48 million through voluntary actions. And at the current rate that the company is burning cash, about $17 million a day, it has enough reserves to last two years.