Sunday, January 01, 2012

Southwest Asks Employees to Accept Pay Cuts to Avoid Furloughs: Airline says it can avoid job cuts through next year with union deals

Southwest Airlines Co is asking the company’s labor unions to accept pay cuts for the first time to prevent furloughs and layoffs through the end of next year.

Airlines have started taking more drastic action, as hopes of receiving more federal aid to cover worker salaries for another six months have grown dimmer, with Congress still at an impasse over additional pandemic relief. Southwest Chief Executive Gary Kelly, who had been receiving reduced pay since March, said Monday he will forgo his salary altogether through the end of next year.

Airlines were barred from furloughing or laying off workers until Oct. 1 under the terms of the $25 billion in aid they received earlier this year. With demand for travel still 70% lower than a year ago, airlines say they cannot justify retaining employees they no longer need while bleeding cash. When the restrictions that accompanied government aid expired last week, rivals including American Airlines Group Inc. and United Airlines Holdings Inc. went ahead with over 32,000 cuts.

Southwest has never furloughed or laid off employees and had pledged to avoid those measures this year. But Mr. Kelly had warned last week that furloughs would be inevitable without additional federal aid. He said Monday that quarterly losses could be “in the billions” until an effective vaccine has been widely distributed, likely not until late next year.

“We just can’t afford to wait any longer,” he said in an interview. The airline says it can continue staving off job losses through next year, if terms are reached with its unions by Jan. 1. “I feel like we have a moral obligation to them.”

The union that represents Southwest’s pilots said it had agreed to hold discussions with the company. However, in a letter to pilots, union leaders criticized the company’s actions so far and expressed skepticism that concessions would provide much boost to the bottom line.

“Agreeing to discussions is very different than agreeing to concessions,” they wrote. “We should not be in any rush to make shortsighted moves when we lack the clarity we need to make informed decisions.”

The union that represents Southwest’s flight attendants and several other groups of workers also signaled its resistance to concessions.

“It’s a slippery slope and we have no intention of sliding down it,” said John Samuelsen, international president of the Transport Workers Union.

Mr. Kelly said he still thinks Congress will strike a deal for pandemic relief, including a provision that would cover airline salaries through the end of March. If that happens, any reductions that unions agree to would be reversed.

“These aren’t bailouts. This is trying to keep the country out of a depression,” he said.

Other airlines have said they’ll bring furloughed workers back, if more aid is approved in the coming days. Negotiations over a broader pandemic relief package continued Monday after an attempt to quickly pass a narrower bill focused only on airlines quickly fell apart Friday.

Mr. Kelly said he would go without his salary through the end of 2021. Senior executives will continue taking a 20% pay cut during that time, and the other nonunion employees will have their pay reduced by 10% to avoid layoffs.

Other airline executives, including the chief executives of United and Delta Air Lines Inc., have given up their salaries through this year. American’s chief executive is paid only in stock.

Carriers have had varying degrees of success in mitigating forced cuts through early retirement deals and negotiations with unions. Some 20% of Delta employees opted to leave, and the airline has reduced work hours by 25% for its ground employees. These measures helped it avoid any furloughs for flight attendants, mechanics and most other front-line workers. The airline said it would delay furloughs by a month for its pilots to continue negotiating with their union.

United, which is furloughing more than 13,000 employees, reached an agreement with pilots to delay any cuts until June.

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