Southwest Airlines CEO Gary Kelly says furloughs and layoffs are still a possibility for the Dallas-based carrier unless it can triple its number of passengers by the end of 2020.
Kelly has urged employees to consider early retirement and long-term leave programs designed to shrink the company’s workforce during the upcoming months when federal stimulus money runs out but air traffic numbers are still expected to be down significantly.
“Although furloughs and layoffs remain our very last resort, we can’t rule them out as a possibility, obviously, in this very bad environment,” Kelly said. “We need a significant recovery by the end of this year—and that’s roughly triple the number of passengers from where we are today.”
Kelly shared the message last week in a podcast to employees. It also was posted on an internal blog.
Southwest has just over 62,000 employees nationwide, including about 10,000 in Dallas, where it has its corporate headquarters. Last month, the company unrolled a proposal for “the most generous buyout package in our history” and employees have until Wednesday to take the deal.
Other airlines, including Fort Worth-based American, are similarly urging employees to take a leave or buyout. American’s leaders have been telling employees that if the company doesn’t get enough volunteers for leave or buyouts, it will likely have to resort to involuntary layoffs.
Kelly’s comments come as the carrier tries to climb out of the worst of the COVID-19 pandemic, but is still taking cost-cutting measures and limiting capacity on plans to bring customers back. Southwest said it will only sell two-thirds of plane seats through September.
“So I won’t belabor the points again today, other than to say we are still overstaffed, and COVID cases continue to rise,” Kelly said. “And, as you know, that directly impacts our business.”
Kelly has said he expects business to be down about 30% in the fall and that the company will likely need to reduce its staffing by a similar percentage.
The number of travelers has increased in the last three months after bottoming out in early April, but there are concerns with the rising number of COVID-19 cases. Still, only about a quarter of the number of passengers who boarded planes a year ago are getting on them now, according to Transporation Security Administration figures.
“The state of the pandemic has worsened since the partial reopening of the country,” Kelly said. “The recent rise in COVID cases and increasing regional restrictions on businesses and states requiring quarantine aren’t positive developments for our business, and we are concerned about the impact on already weak travel demand.”
New York, New Jersey and Connecticut enacted quarantine restrictions on travelers from states with high COVID-19 rates, including Texas. Hawaii also has travel restrictions for outside travelers.
Last week, Southwest said more than 8,392 employees had opted for buyouts or “emergency time off” for later this year, roughly 14% of the company.
“Each day, we spend more cash to run the operation than we are taking in from customer bookings, which is unsustainable despite our current cash reserves,” said a memo to employees from vice president and chief people officer Julie Weber. “We are overstaffed for current levels of customer demand and for the foreseeable future, and the payroll support program proceeds expire at the end of September.”
Weber said in her memo that if Southwest is forced to take involuntary steps, it would most likely “begin with evaluating cuts in benefits and pay.”
If it has to furlough workers or cut jobs, she said, it would provide at least 60 days notice.
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