Southwest Airlines Asking Workers to Take Pay Cuts, Stock Bearish


Oct. 6 2020, Updated 10:06 a.m. ET

Southwest Airlines has asked their union workers to take pay cuts pending government stimulus talks. With the public still wary to travel, many airlines are laying off employees in droves, but Southwest wants to keep its no-furlough promise. In the meantime, the company's CEO has halted his own pay through the end of 2021. Southwest Airlines stock is, unsurprisingly, bearish.

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What pay cuts could mean for Southwest workers

Southwest Airlines chairman and CEO Gary Kelly has already announced that he's forgoing his own salary through the end of 2021, but he's not the only one taking a pay cut. The company has asked its union laborers to accept pay cuts as a way to avoid layoffs through at least the end of the year.

While Southwest Airlines unions have yet to come forth with a decision, Kelly has made it clear he'd much rather have his employees make a collective sacrifice than lay a single employee off. 

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Southwest pay cuts dependent on congress stimulus decision—or lack thereof

Kelly has not been quiet surrounding the American economic stimulus matter. Since the Payroll Support Program (PSP), part of the CARES Act, expired on Sep. 30, congress has not come to a consensus on a stimulus package. They have delayed the decision further since the hospitalization (and subsequent release) of President Trump. 

The terms of the PSP (worth $25 billion for the airline industry) included no layoffs until Oct. 1, one day past the aid package's expiration date. 

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In response to the PSP expiration, Kelly said in a video statement, "The payroll support that we received in the original federal aid package has allowed us to avoid those difficult actions all the way through the end of this year, but you have to know that we're not immune to this."

Kelly says Southwest has never furloughed employees since its inception in 1967. If economic stimulus comes through for the airline industry, he says pay cuts—and layoffs—won't be necessary.  

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For many airlines, layoffs are a survival tactic

While Southwest Airlines is attempting pay cuts as a last gasp in the 70-percent-slimmer airline industry, its competitors are laying off employees en masse. 

On Oct. 1, American Airlines began laying off 19,000 workers, including 8,000 flight attendants. Back in August, CEO Doug Parker warned that a lack of additional economic stimulus would lead the company to this decision. 

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United Airlines is seeing a similar fate. They are in the midst of taking 16,370 employees off payroll as a result of expired aid.

Delta Airlines also laid off 1,941 pilots. Most airlines said they will reverse furloughs if congress delivers aid.

Southwest Airlines pay cuts only make stock more volatile

It should come as no surprise that Southwest Airlines stock has been bearish since the crash that started on Feb. 20. In mid-September, the company saw a market peak of $42.10, a number that dropped significantly in the following weeks. Today, the stock is teetering at around $38.49 per share. Only increased travel—or possibly economic stimulus—may change this. For now, Southwest Airlines investors are holding on to their oxygen masks or ditching the flight altogether.  


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