CEO says Southwest needs union pay cuts to avoid furloughs

DALLAS (AP) — Southwest Airlines will cut pay for nonunion workers in January and said union workers must also accept less pay or face furloughs next year as the pandemic continues to hammer the airline business.

Chairman and CEO Gary Kelly said on Monday that unless the federal government gives airlines more money, Southwest will have to sharply cut spending to avoid losing billions of dollars every quarter until a coronavirus vaccine is widely available.

Air travel is down nearly 70 per cent from a year ago. “We would have to wipe out a large swath of salaries, wages and benefits to match the low traffic levels to have any hope of just breaking even,” Kelly said in a video to employees.

Union officials said the company should find options other than pay cuts.

Southwest, the fourth-biggest United States (US) airline by revenue, recently said it is burning about USD17 million a day. It lost USD915 million in the second quarter and borrowed billions while cutting back on flights to conserve cash.

Kelly said he won’t get a base salary through 2021 and non-union employees will see a 10 per cent pay cut on January 1 to avoid layoffs through 2021. Southwest will negotiate similar cuts from union workers, who represent about 85 per cent of the workforce.

A Southwest Airlines jet takes off from Love Field in Dallas. PHOTO: AP

Southwest Airlines Co had about 61,000 employees in June but at least 4,200 agreed to leave. At least 12,500 more took long-term leaves of absence.

Pay for union pilots, flight attendants, mechanics and ground workers are governed by long-term contracts, but Kelly wants “reasonable concessions” by January 1.

Southwest brags that it has never laid off employees in its roughly 50-year history. The Dallas-based carrier — along with Delta Air Lines — convinced thousands of workers to take early retirement or buyouts but avoided layoffs or furloughs. In contrast, American Airlines and United Airlines furloughed 32,000 workers between them last week.

All the carriers are lobbying Congress and the White House for another USD25 billion in taxpayer money to pay workers for the next six months.

That’s on top of up to USD50 billion in cash and loans that Congress approved in March. Kelly said pay cuts would be rescinded if Congress approves more money.