Employee Profit-Sharing Returns as Southwest Airlines Netted $977 Million for 2021

Southwest Airlines will share $230 million with its employees after pulling in a $977 million profit for 2021, bringing back a perk that disappeared in 2020 due to steep losses from the COVID-19 pandemic.

The Dallas-based airline announced Thursday a modest profit of $68 million for the final three months of last year as the omicron variant of COVID-19 continued to make for a choppy recovery for air carriers. But the company was able to put away another $43 million in its employee bonus program after a tough year for recruiting workers.

Profit-sharing is one of the biggest financial perks for employees at major airlines, and Southwest Airlines was able to give away a record $677 million in 2019 before the COVID-19 pandemic swept in during 2020 and wiped out any chance of a profit.

The $230 million pot means an average of $4,250 per worker, usually paid out sometime in March. That compares with more than $11,000 per employee in 2019.

How much each exact employee gets in profit-sharing is based on their union contracts and how long they’ve worked with the company.

Southwest was only able to achieve a profit this year thanks to $2.7 billion in government support grants, money that was supposed to go toward paying employees’ salaries, wages and benefits anyway.

But the virus caused Southwest’s flight capacity to drop 16% last year, compared with 2019, and its revenues took an even bigger hit, down about 30%.

Southwest might need incentives like profit sharing to help attract and retain workers as the aviation industry competes with the rest of the economy for a smaller supply of labor than it’s used to. Southwest plans to hire 8,000 workers this year after hiring more than 5,000 at the end of 2020. The company has about 54,000 workers nationwide, including 1,000 in North Texas at its corporate headquarters at Dallas Love Field.

The company has also pushed its base pay from $15 an hour to $17. It’s the second base pay raise the company has enacted in seven months as salaries, particularly for entry-level workers, soar with inflation demands.

“We are making additional investments to attract and retain talent, including our recent decision to further raise our starting hourly pay rates from $15 per hour to $17 per hour,” said a statement from Bob Jordan, who takes over as CEO for the retiring Gary Kelly next week. “We are currently in discussions with our workgroups to enact this increase in pay rates.”

COVID-19 has continued to make staffing the airline difficult, particularly as the more contagious omicron variant swept across the nation. The airline had about 5,000 employees with COVID-19 in early January, Jordan said.

“Beginning in early January, we experienced a very difficult environment due to rapidly rising COVID cases and the decrease in available staffing levels,” he said.

Southwest has had to extend holiday incentive pay through February to “maintain sufficient available staffing to minimize flight cancellations.” It will cost the airline about $150 million in the first quarter.

Southwest is also cutting its schedule in the first half of the year to provide more “buffer” to operations due to staffing challenges. Still, Southwest doesn’t expect to be profitable in the first three months of 2022.

Profit-sharing has become a competition in the airline industry, one that can upset workers if it disappears, particularly in a time when airlines need their skills more than ever. Earlier this month, Atlanta-based Delta Air Lines decided to give a special $1,250 per-employee contribution to its profit-sharing pot even though the company had a $3.4 billion operating loss.

Fort Worth-based American Airlines, which lost $2 billion for the year, did not accumulate any profit-sharing for employees for 2021. Neither did Chicago-based United Airlines. Both airlines reported year-end results earlier this month.

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