Please ensure Javascript is enabled for purposes of website accessibility

Southwest Airlines Goes to Employees Seeking Concessions

By Lou Whiteman – Apr 17, 2020 at 11:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The airline, famous for its good relations with workers, is worried traffic won't return by the Fall.

Southwest Airlines (LUV -1.36%) has reportedly reached out to union leaders to discuss possible concessions once government bailout funds are exhausted.

Southwest and other airlines have been hard hit by the COVID-19 pandemic, which has caused travel demand to fall upwards of 95% year over year. The U.S. federal government has authorized $50 billion in bailout funds to try to get the industry through the downturn without layoffs, but company officials are increasingly skeptical that the package will be enough to avoid taking other actions.

Southwest is expected to receive $3.2 billion in direct support from the government and a $1 billion loan to help it make payroll. The funds are conditioned on the airlines doing no layoffs or furloughs through Sept. 30, among other requirements.

A ground crew worker directs an airplane to the terminal.

Image source: Getty Images.

Southwest has approached its unions to open dialogue about potential concessions should traffic not return by the Fall, Reuters reports. The company did not disclose the specifics of what it was seeking, but union leaders said pay cuts and other measures were on the table.

Southwest is hardly alone in voicing concerns that conditions won't normalize by the end of September. Management at United Airlines Holdings has warned employees that they don't expect a quick rebound in travel, saying "we have some tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today, starting as early as October 1."

American Airlines Group has been more sanguine, with CEO Doug Parker telling CNBC on Wednesday that bookings for travel later in the summer are beginning to "tick up a bit," connoting a gradual recovery in the third and fourth quarters of 2020.

Southwest's actions are notable in part because the airline is considered among the best run companies in the industry, and its shares -- down "only" 40% -- is the best performing stock in the sector for the year. Southwest has also never in its 49-year history resorted to layoffs, furloughs, or pay cuts, keeping its entire staff on board even following the attacks of Sept. 11.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Southwest Airlines. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Southwest Airlines Stock Quote
Southwest Airlines
LUV
$32.54 (-1.36%) $0.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
338%
 
S&P 500 Returns
108%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.