Southwest Details Voluntary Separation Packages
- Southwest is joining the ranks of airlines that are seeking to reduce their workforces. The Dallas-based carrier famously has never had an involuntary layoff in its history, and it probably still won’t. Earlier this year, CEO Gary Kelly said Southwest was negotiating with its unions for some sort of voluntary package or concession, and a last resort would be layoffs.
Thus, the company is offering voluntary leave. Employees will have two options. The first is an extended emergency leave program that requires the employee to take a minimum of six months off, although the company will provide health and flight benefits and partial compensation. The second, a voluntary separation package, gives employees a cash severance based on years of service and maintains flight benefits for four years, in most cases. “Southwest is taking every action possible to protect the Southwest family and offer job protections to our valued employees,” the company said in a statement. “These new voluntary programs are designed to support both Southwest’s long-term success and the goal of avoiding furloughs or layoffs.”
- Members of Parliament in the U.K. are calling for the government to strip British Airways of some of its lucrative London Heathrow slots over what they allege is excessive job cutting by the carrier. BA had announced plans to reduce its workforce by 12,000 employees and to change the contracts of several thousand of those that remained. Unions blasted this plan when it was first announced and alleged that IAG was unfairly targeting its British employees while its Spanish employees got more favorable packages. The complaint caught the ear of lawmakers who are calling BA’s plan “unethical,” “immoral,” and “opportunistic.” They have called on the civil aviation regulator to investigate and to determine if punitive measures, like taking back Heathrow slots, are in order.
- Cowen & Co. analyst Helane Becker predicts the U.S. airline fleet to shrink by more than 20%, with another 337 aircraft retired or parked in addition to the close to 1,000 that already are grounded. This will result in airlines needing between 11,000-13,000 fewer pilots. Becker added that this reduction in force is more likely to be through retirements and buyouts than layoffs, however.
- Former Spirit CEO Ben Baldanza and former Airline Weekly editor Seth Kaplan, in their weekly “Airlines Confidential” podcast, make an important point about early-out packages, like the ones now offered by the Big Three and Southwest. The process carries the risk of adverse selection, in which the best and most skilled employees, with the greatest ability to find other jobs, wind up being the ones opting to leave. Baldanza thinks airlines will quietly tell their most valuable employees that their jobs are safe, to discourage them from leaving.