Southwest Airlines may begin huge layoffs despite taking federal assistance

It’s no secret that the airlines have been taking a beating financially during the pandemic. As if commercial air travel wasn’t already miserable enough (unless you could afford to fly first class) in more “normal” times, who wants to be packed in like sardines with a bunch of people who are constantly coughing and breathing recycled air in a sardine can with the virus floating around? So the number of flights and total seats sold plummeted, along with the major airlines’ profits. And yet, through it all, they insisted that they wanted to keep their labor force on the job as much as possible. But now one airline in particular is warning its workers that the well is about to run dry and if they don’t want to take a voluntary exit plan, they may be sent packing. Southwest Airlines informed its workforce this week that layoffs may be on the way by the end of the summer. (NY Post)

Southwest Airlines CEO Gary Kelly told employees on Monday it needs a dramatic jump in passenger demand or it will be forced to take new steps to reduce staffing.

Employees face a Wednesday deadline whether to participate in a voluntary incentive program to leave the airline.

“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 in a message to employees. “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.”

If we were looking at this in a vacuum, these decisions by Southwest wouldn’t be shocking at all. When your business falls off drastically, you have to scale back to keep the operation afloat. The only thing we might find ourselves wondering is what took them so long. Everyone in the industry knew that the pandemic was going to destroy their business model until people felt safe to travel once again and businesses reopened to the point where they felt it practical to send their employees on trips again.

But the airlines, including Southwest, secured an unfair advantage for themselves. As I discussed back in April, almost all of the airlines had their hands out when the Payroll Support Program was rolled out, securing literally billions of dollars of grants and low-interest loans in the name of keeping their workers on the payroll. Southwest soaked up $3.2 billion from that program with another $2.7 billion federal loan being discussed and, as such, wasn’t supposed to be able to lay off or furlough any workers until the program expires in September.

But that doesn’t mean that they haven’t been able to engage in some arm-twisting to cut labor costs. They’ve been offering some incentives for people who are willing to resign and go on unemployment, along with other “sweeteners” to get people to voluntarily leave. And now they’re upping the pressure on their workers to take these options or they will face cuts to their pay and benefits prior to being given the boot in October.

As I wrote in April, none of this needed to happen in this fashion. The workers could have done what the rest of the nation’s suddenly jobless individuals did and applied for federally enhanced unemployment benefits while waiting for air travel volume to return to its previous levels. Instead, the taxpayers shelled out at least three billion dollars (and possibly more than five billion by August) to ostensibly pay workers in the private sector who were not needed, and now most of these workers will be out of a job anyway.

None of the airlines were going to “go out of business” as some, including the President, have moaned about. They would have gone into bankruptcy protection, just as most of them did in the early 2000s, emerging yet again after demand for their services returned to normal. And their employees would have needed to use the same support systems that everyone else has been relying on. While the travel industry is certainly an “essential business” by any measure, they would have continued to operate (just as they have been) at reduced volume with fewer workers. Instead, we managed to distort the market through federal largesse and the taxpayers have once again been left holding the bag.

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