The billion 25 billion stimulus package is causing airlines to cut furlough workers and flights. Fox Business’ with Christina Partisnevelos more.
In a video released to employees on Monday, Southwest CEO Gary Kelly announced that the airline would need to “make more sacrifices” by reducing salaries during 2021 to avoid layoffs and furloughs amid the ongoing impact of the coronavirus epidemic on travel demand.
The announcement comes as the airline industry is calling for an increase in the payroll support program allocated under the Coronavirus Assistance, Relief and Economic Security (CARES) Act, which Congress passed in March following the end of a on 25 billion bailout on Oct. 1. .
Kelly noted that since the Act’s Payroll Support Program (PSP) has expired, Southwest “cannot meet the conditions required to maintain full pay and employment,” Kelly said.
Hailing his staff, he said they had “performed brilliantly” and called him “our hero”, but the 12-year-old CEO said “now is the time to do what it takes to save Southwest Airlines.”
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While Kelly said he was grateful for six months of previous pay scales, he argued that it “just didn’t last very long or long,” with local air travel falling below the “1970 level” during the epidemic to 70%. . A year ago.
“There has been a dramatic reduction in costs and expenses in the Southwest, but that’s not enough to compensate for the 70% revenue loss,” Kelly noted. “Salaries, wages and benefits are our far-reaching commodities far and wide, and we just have to accumulate large salaries, wages and benefits to match lower traffic levels in order to have no hope of breaking down.”
He also warned that quarterly losses to airlines could be in the billions unless a vaccine becomes available, distributed and “effectively kills” the virus, which will not be until the end of next year.
Kelly added, “We hoped the federal government would move quickly again, but they didn’t and that’s disappointing,” Kelly added. “We have lobbied hard and given overwhelming support for the expansion of the PSP, so to our disappointment we have yet to see legal action.”
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Effectively immediately, Kelly’s already reduced base wage will be zero, which will continue until the end of 2021. Meanwhile, earlier a reduction in fees for the board of directors of the Southwest and the base pay of senior executives of the airline will be announced, which has already been reduced by 20. %, Will remain the same until the end of next year.
In addition, the base salaries of the remaining leadership groups will be reduced by 10% starting January 1, 2021 for the following year. The cuts will also affect Southwest’s non-contract employees in an effort to avoid their layoffs, at least until the end of next year.
While Kelly promised union workers that his goal was to avoid furloughs, he warned that the option would be used as a “last resort” if Southwest and its unions failed to agree on a “reasonable waiver.”
“We don’t have time for long-running negotiations and I have instructed our company’s labor team to take a simple approach,” Kelly said.
He added that if the PSP is extended by next March, efforts to cut salaries will be stopped or reversed.
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Kelly stressed that while the company focuses on driving traffic, winning back old customers, and gaining new customers, the company notes that by adding new cities to its schedule it is “playing crime”.
“If we’re going to furlough, we’re going to have to cut deep to realize enough savings, and cutting our capacity works against our goal of driving more traffic,” Kelly said. “We need cost savings and people, it’s that easy.”
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The Southwest plan has come about because its competitors have already started layoffs.
| Ticker | Security | The last | Change | Change% |
|---|---|---|---|---|
| L.U.V. | Southwest Airline Co. | 38.49 | -0.27 | -0.70% |
| UAL | United Airlines HLDG. | 36.20 | +0.19 | + 0.53% |
| AL | American Airlines Group INC. | 13.12 | +0.12 | + 0.92% |
United Airlines said the stimulus on Capitol Hill has forced it to furlough 13,000 employees while American Airlines has started furloughs for 19,000 employees.
At the end of Monday’s trading session, the Southwest stock closed at .38.49 per share and remained slightly lower during the trading hours.
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