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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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.
“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.
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?