This is How Southwest’s CEO is Avoiding Layoffs

Many airline workers have been nervous about being laid off due to coronavirus but Southwest is figuring out a way to keep them on board.

The company’s CEO has said that Southwest can avoid layoffs all the way through 2021 with employee pay cuts.

Chief Executive Gary Kelly told employees on Monday that the airline can avoid furloughs and layoffs as long as union workers agree to pay cuts.

It was just last week that the CEO said the airline may have to follow rivals and lay off thousands of employees due to the coronavirus crisis in the absence of an extension of federal payroll aid.

Rivals American Airlines and United Airlines have already begun furloughing 32,000 employees.
However Kelly said that if the federal relief did come through, Southwest would discontinue or reverse the pay-cut efforts.

According to the CEO, if no payroll support package is given, cost savings must be in place for all employee groups by January 1st of next year.

The Chief is including himself in the cuts by reducing his own base salary to zero all the way through the end of 2021 and will continue a 20% cut in senior executives’ pay through the next year.

Southwest is also reducing all leadership group salaries by 10% until Jan. 1, 2022, when Kelly said they will return to the current level.

“We would have to wipe out a large swath of salaries, wages and benefits to match the low traffic levels, to have any hope of just breaking even,” Kelly said. He warned that quarterly losses could be in the billions until there is an effective vaccine that becomes widely available and he does not expect that to happen until late next year.

“We simply don’t have time for long, drawn-out, complex negotiations,” Kelly said of the pay cuts.

U.S. House Speaker Nancy Pelosi said last Friday that a deal was “imminent,” and talks with Treasury Secretary Steven Mnuchin for a broad COVID-19 relief deal were continuing this week.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.