Southwest Airlines, temporarily the largest in the world due to the coronavirus crisis, will have to make changes to their operations. But the unions that are being idealistic, but not realistic.
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Unprecedented Times
Some airlines have been better than others at disclosing just how bad the coronavirus crisis has affected its business. United, I have found, to be one of the most detailed which the stock market may not reward but should. Delta and American Airlines have indicated that revenue is down more than 90%, United, a bit more candid has indicated that passengers are down 97% compared to one year ago.
Following September 11th, reservations contracted globally between 12-37%. As Texas opens up next week (hub home to Southwest, American, and United), New York appears to have flattened the curve, travel is universally damaged like never before.
Bankruptcy Not on the Table
Southwest Airlines is currently the largest airline in the world as measured by seats flown. That’s a mind-boggling statistic but demonstrates the absurdity of the current situation. Despite its new role as world leaders, Southwest management has taken a few unique approaches.
Surprisingly, CEO Gary Kelly has told pilots that bankruptcy for Southwest Airlines is not on the table. He has taken a 10% pay reduction for the year (which pales in comparison to other airline CEOs.) But he has also made it clear that while they have enough cash reserves ($4bn) to make it through six months, that an extended downturn past that point will utilize too much cash and impair its future.
Kelly added:
“So we’ve never had a furlough in our history, I’m certainly not wanting to do that now. And that’s not our plan. And we just can’t ever promise that that won’t be the case. But it’s all predicated on this being a dip, and then returning to normal.”
Southwest Unions Not Budging
Some Southwest Airlines unions see statements by Kelly and other executives as unexpected.
“The contractual concessions that the company has asked us and other unions to consider are unrelated to head count imbalance,” said a letter to members from Lyn Montgomery, president of Transport Workers Union Local 556, which represents flight attendants. “Rather, Southwest Airlines now seeks reductions in our pay rates through a freeze to our pay scale as well as potentially other aspects of our contract.”
Another union has rallied around an employee lowest on the seniority list. That union is fighting any furloughs, which the airline is too.
Unions and management often have tense arrangements. Unions do not want to give up hard-fought benefits for members, but campaigning against any furloughs and failing to give any ground on contracts may be idealistic but not realistic in the current environment.
For airlines to come out of this crisis in the best possible scenario it will take a combination of concessions, furloughs, and creativity. Now is not the time for management nor unions to take principled stances.
Conclusion
This could be the toughest challenge that the travel industry faces in our lifetime (hopefully, it is.) While I have been supportive of American Airlines mechanics that waited for years to achieve a new contract and flight attendants at American that were furious for some time, Southwest Airlines union members should be fighting for jobs, not benefits. Those who are fighting furloughs may also consider just what it would take to avoid any layoffs at all and consider what is best for everyone involved.
What do you think? Are Southwest Airlines union leaders just doing their jobs to keep members as protected as possible? Is it really a time to fight pay cuts when jobs are on the line?
It’s just postering now to try to gain leverage, nothing else. As we get closer to the hammer falling on October 1st they will be more pragmatic. We all know there will be massive layoffs and a complete rethinking of what levels of service are feasible and profitable once the taxpayers are no longer paying their payroll.
I love So West and they are doing a fantastic job during these tuff times. Unlike American airlines, I live in Jamaica and have always flew American untill I knew I could Fly So West. I am an American Citizen however i am a resident of Jamaica my husband is Jamaican and i so chose to live in Jamaica. How i had to fly to Northern California on March 3rd 2010. Not knowing that COVID19 would cripple the world i know now that the cruise ship that came to JA and turned away was a warning. I am now at my Sons house here in Washington State via California (on So West where there was only 12 passangers.) I am stuck in limbo missing my home and want to go home and So West is not flying into Montego Bay and thats only because they arent taking any chances all ports are closed in JA and so i see that i can fly into Kingston the first week of May for a whopping $1647.00 that doesnt include luggage which is another $75.00 on American
Thats totally ridiculous. If i wait till June 5th i can fly from Seattle to Montego bay for $382.00 much better
Pay 60 for luggage on United im more liking this price. If it were So West it would be about the same as United and i would get baggage free.
So i give So West 5 stars because they are doing the best to keep everybody happy. American is just as greedy as greedy Americans are . So West is actually waiting to hear from the Prime Minister to sau the ports are up and running.
As a member of one those unions, I can attest that the author has no idea what he’s talking about. Classic outsider without any practical experience in the field looking in and trying to formulate an opinion. Unfortunate.
@Anonimsl – Feel free to fill us in, but without being a union member we can only go off statements from your representation, right?
I am also a member of one of these unions at SWA. My company has taken it upon itself to over staff in my work group in an effort to cut out the over time. Obviously this is the company’s prerogative and they can do this. Now every city that SWA flies to is over staffed because of the cut backs on our flight schedule. In my opinion the company wants us to take a potential pay cut because they’ve over hired. Some of the employees depend on this over time to pay bills. It’s not the employees fault that the company has hired to many people, but I shouldn’t have to pay for their mistake.
I am one of those “over hired” people you are referencing that you think needs to be furloughed I suppose. I have a family to feed too and chose SWA because the group has always stuck together and looked out for each other. You were once at the bottom too and depended on those above to make responsible personal financial decisions. If you chose to live beyond your normal salary and can only pay your bills with overtime then I question your position. If you can’t live off regular pay then you should try living off the pay in those early years again. Very offensive that you would choose your overtime pay over fellow professionals trying to just make starting base salaries.
I’m a very pro-union person but I think that in this case the unions are flat out wrong. If they expect gains to be shared when times are good, they need to pony up some when times are rough. They seem to expect a deal where they get the best of all worlds.
SWA management spent over $10B (that’s $10,000,000,000) in the last ten years buying back over 250 million shares of Southwest stock. Perhaps the employee unions would prefer management re-sell some of those shares to cover our losses, rather than ask the employees to bear the brunt of that lost capital.
You have to consider that there is more than one way to achieve labor cost savings and that these are the opening moves in negotiations in that direction.
Management of course is going to want contract concessions. Those are easier to quantify and will last longer. The unions are proposing various other solutions that will provide temporary relief but not result in permanent losses of and when things get back to normal.
Part of the problem right now is that no one has even the slightest clue what the recovery is going to look like. Unions know that headcount is safe until October so they are being smart in taking a go slow approach to any permanent concessions right now. Hopefully by the time October approaches we should have a real idea of how far off traffic is and what the rate of recovery looks like. Waiting allows the unions to have a far better idea of just how needed concessions are and they would be foolish not to take advantage of that extra time.
From what I’ve seen most airline unions are being realistic right now. They fully understand the scope of the problem and are prepared to act as needed. But they are not going to give into panic and make moves that they may come to regret when they don’t need to yet.
Jesus said do not fall in love with things in this world and that’s what we have done. The only thing we should fall in love with is people. That way when hard times come we can help each other out, in other words it is called love your neighbors. Let’s try that and everything thing else will work itself out. I’m thankful for the SWA management team and the Union management team. Thank you both. You both are the best. Now let’s just get along and do what’s best for all team player’s.