Southwest Airlines hasn’t furloughed any employees during the pandemic. They’ve warned, though, that since business hasn’t picked back up to more than half of what it was last year that they either needed 10% pay cuts or furloughs.
The pay cuts would have given the company half the savings of furloughs, but they preferred to keep their nearly 50 year track record of no furloughs (for the company culture) and have employees all active positioning the airline to return to growth.
Southwest is likely to get nearly $2 billion out of the federal government’s new $15 billion airline subsidy, along with a requirement that they keep all of their current employees on payroll through March 31. The airline now says it will not furlough anyone in 2021.
- Furloughs would have taken place between March 15 and April 1.
- Savings would have accrued after that, when the terms of their subsidies allow them to furlough workers. Thus they believe they’ll still have too many workers in place April 1 onward.
- Yet they aren’t going to furlough anyone, even though they can.
- The bailout gives them at least double what the furloughs would have saved them in 2021.
[CEO Gary] Kelly said the extension of PSP was always the airline’s “preferred plan” and that “it means we can stop the movement toward furloughs and pay cuts that we previously announced. For that, I am most grateful.”
“The new law will provide payroll support for all Southwest Employees through March 31, 2021. Given this, we currently do not anticipate the need to conduct any furloughs or pay cuts next year,” Kelly said in a memo sent to Southwest staffers on Monday.
Put another way, Southwest really is going to spend some of the bailout money on employees (perhaps 50%) which is how the government aid was sold – unlike United Airlines which is likely to receive about $3 billion and plans to only pay its 16,000 furloughed workers through March as-required keeping the rest of the taxpayer money for themselves and their shareholders.