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Southwest CEO Urges Lawmakers to Extend Airline Payroll Support

By Lou Whiteman – Updated Jul 31, 2020 at 12:46PM

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Absent legislative action the airlines are expected to do massive layoffs starting in October.

Southwest Airlines (LUV -2.88%) CEO Gary Kelly on Friday backed a union-led effort to extend government support for the airline industry as a way to avoid layoffs.

As part of the CARES Act economic stimulus plan enacted earlier this year, U.S. airlines received $25 billion in financial support to continue to pay employees even as travel demand plummeted. The airlines in return for the funds were prohibited from doing layoffs or furloughs through Sept. 30.

The funds are set to run out next month, and airlines have warned that deep cuts are likely as the industry braces for an extended downturn.

A masked traveler walks through the airport.

Image source: Getty Images.

Kelly in a video message to employees posted Friday said he supported efforts to renew the payroll support for another six months as part of a second round of stimulus currently being negotiated in Congress. Kelly said he would support a so-called "lift and shift" proposal that would keep the funding, and the layoff restrictions, in place.

Other airlines, including United Airlines Holdings (UAL -4.01%) and American Airlines Group (AAL -3.93%), have lent support for the effort, but Kelly's statement is perhaps the most direct public endorsement of the effort by an airline CEO.

Southwest has never done layoffs in its nearly 50-year history, and the company is hoping to avoid furloughs this Fall after more than 25% of Southwest employees volunteered to take buyouts or extended leave of absences to help cut costs.

Airlines were forced to provide the U.S. Treasury with warrants in exchange for the earlier round of payroll support. While the industry is supportive of continued assistance, it is less clear they would be willing to trade more stock or collateral for that continued help. Especially since travel demand is expected to remain weak well beyond the six-month extension period being discussed, and layoffs are a viable alternative.

Kelly said he is also supportive of legislative efforts to help encourage travel, including liability protections for businesses, an extension of the ticket tax holiday, and grants for airports.

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

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Stocks Mentioned

Southwest Airlines Co. Stock Quote
Southwest Airlines Co.
$32.05 (-2.88%) $0.95
United Airlines Holdings, Inc. Stock Quote
United Airlines Holdings, Inc.
$33.07 (-4.01%) $-1.38
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American Airlines Group Inc.
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