Southwest Air Expands Layoff Threat With Warning to More Workers

(Bloomberg) -- Southwest Airlines Co. sent another 403 workers warnings that they could be furloughed, as the carrier struggles to shave $500 million from labor costs and avoid the first involuntary layoffs in its 49-year history.

The airline expects the mechanics and other employees to be laid off in January if it can’t reach agreements with unions, according to an emailed statement Wednesday. Since seniority rights mean Southwest can’t know which individuals ultimately will be let go, it sent another 1,503 workers notice that they could be affected.

Southwest’s second round of such notices in two weeks signals a growing threat that it will fail to get unions to agree to a one-year, 10% reduction in costs. Other spending cuts have failed to stem millions of dollars in daily losses since the coronavirus pandemic began pummeling travel demand in late March. The Dallas-based airline has 20% more employees than it needs for current demand, at an expected cost of about $1 billion for next year.

“It’s unfortunate we had to move forward with this outcome, as the affected employees are valued members of the Southwest family” Russell McCrady, Southwest’s vice president of labor relations, said in the email. “We need agreements to be reached to help us save these employees’ jobs and address the extremely challenging economic conditions we face.”

Southwest has said it would burn as much as $11 million a day this quarter as operating costs continued to outpace a small recovery in demand. Domestic travel industrywide remains about 65% below last year’s levels. The airline reported an adjusted loss of $1.2 billion for the third quarter.

The employees who received notices Wednesday are members of three groups represented by the Aircraft Mechanics Fraternal Association and include facilities maintenance workers and technicians who clean aircraft and replace carpets and seat covers, among other tasks. They could be furloughed as early as Jan. 25 if no concession agreement is reached.

Southwest and its unions began talks in early October aimed at reaching agreements by month’s end, protecting workers from furlough through next year. The carrier reached deals with two small work groups earlier and has extended talks with others. On Nov. 6, it issued furlough warnings to 42 Teamsters who face possible layoffs around Jan. 11.

U.S. airlines have furloughed about 38,000 workers since Oct. 1, including large swaths at American Airlines Group Inc. and United Airlines Holdings Inc. Those cuts followed the departure of 150,000 people through leaves, buyouts or early retirements. About 17,000 Southwest employees, or 25% of its payroll, have left temporarily or permanently through voluntary programs.

An extension of federal support for airlines would avoid Southwest’s need for concessions. House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer on Tuesday asked Senate Majority Leader Mitch McConnell to resume talks on a stimulus package that proposed another $25 billion in payroll aid beyond what carriers have already received. McConnell stuck to his insistence on a smaller package.

©2020 Bloomberg L.P.