Southwest Airlines CEO Gary Kelly said all employees will need to take 10% pay cuts in 2021 to avoid furloughs amid a financial crisis that is expected to drag into next year.
Kelly, whose Dallas-based airline hasn’t furloughed any employees during the COVID-19 pandemic, said non-union employees will take 10% pay reductions effective Jan. 1. The company will also go to unions asking for similar sacrifices and hope to get a deal quickly before the New Year.
“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 breaking even absence substantial improvement in our business,” Kelly said in a video message released Monday.
Kelly said concessions might not be needed at all if lawmakers come through with a second round of airline payroll support, which gave $25 billion in March to cover salaries and benefits through September. Airlines want an extension that would cover worker costs through March.
Southwest is still burning through nearly $17 million a day in cash trying to keep the airline aloft, blocking off sales to leave middle seats open and discounting tickets to desperately find travelers.
“Southwest isn’t immune to the pandemic is very humbling, quite frankly, our employees are very devoted,” Kelly said in an interview. “And this is all about saving jobs is all about job security.”
Kelly said he is reducing his salary to zero through the end of 2021, along with reductions in compensation for board directors.
“Our quarterly losses could be in the billions until vaccines are available, distributed and effectively kill the pandemic,” Kelly said in the video. “At best, that’s looking like late next year.”
Southwest is perhaps the airline best equipped to deal with the COVID-19 pandemic, with less debt and more domestic flying than others. But the length and depth of the pandemic have left the airline heavily overstaffed while commercial aviation traffic sits at 1970s levels, Kelly said.
The last time Southwest’s labor groups though the company was suggesting concessions, union leaders rejected the idea, saying that the airline had an overstaffing problem, not a compensation problem.
Now Southwest is formally asking for wage cuts for the first time, and Kelly said the airline needs a deal before the end of the year.
“We simply don’t have time for long drawn out complex negotiations, and I’ve instructed our company’s labor team to take a simple approach,” Kelly said in the video. “And obviously I’ll entertain any ideas that your union reps have, but again, we need to move quickly and with a goal of having cost savings in place for all employee groups by January the first of 2021.”
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