The late co-founder of the airline Herb Kelleher wrote in 2011 about the airline’s legacy of never having to furlough an employee, saying it was because their employees work hard and never forget the customers paying the bills. In the early 1970s they had to return one of their Boeing 737s due to financial challenges, but they kept their employees on.
Of course we’ve never seen travel demand collapse the way we have with the coronavirus pandemic. Southwest Airlines is actually well-positioned relative to its peers to recover. That’s because it has a primarily domestic route network, and domestic travel will recover first as many countries’ borders remain closed. They also haven’t been hit quite as badly a some other carriers to the extent that many of the airline’s markets haven’t been COVID-19 hot spots. While they have a major operation at Chicago Midway, places like Texas and Phoenix haven’t seen spread of the virus the way the Northeast has.
Nonetheless, CEO Gary Kelly told employees in an internal communication that the airline’s heritage “puts our Employees first” though his number one goal “is to protect the future of Southwest Airlines and do my best to provide job security” (emphasis mine). So he laid out a voluntary leave and an early retirement program “in an effort to avoid involuntary furloughs or layoffs” launching on June 1.
[G]iven our planned smaller schedule and network, we are overstaffed and may continue to be overstaffed for the next several years. Currently, our traffic is down 90 percent. We’ve parked almost 400 aircraft. It’s imperative that we bring our Employee numbers down, voluntarily, to correspond with this decline in demand. While we can’t control the pandemic, the economy, or Customer
demand, we can take meaningful measures to cut our spending and conserve cash as much and as quickly as possible.
Voluntary time off, open to “Contract Employees, specified Frontline Supervisors, and Noncontract positions or workgroups” will start at six months and extend to longer durations, providing partial pay and benefits.
Early retirement, open to “nearly all workgroups” will receive a cash settlement, four years of travel (for those who don’t qualify for lifetime privileges) and one year of paid COBRA health coverage (for those who do not qualify for retiree benefits).
Southwest will release full details to employees June 1 but promises “the most generous buyout package in our history” and that they have “worked to make this package as appealing as we can afford.”
They’re hoping large numbers of employees take it, knowing that if they can’t reduce headcount voluntarily they’ll have to do so involuntarily for the first time in company history. And indeed, “[e]ven with these offerings, we can’t guarantee that we won’t have to lay off or furlough Employees
in the future.”