Southwest Airlines Co. told union leaders it might slash some of its 60,000 workers this fall if a deal can’t be reached to cut labor costs further and traffic doesn’t return to more normal patterns. Any furloughs would be the first in Southwest’s 49-year history.
The government bailout bought employees and labor unions time to devise methods to lessen financial hardship, including bridges to early retirement and other separation programs, said Sara Nelson, president of the Association of Flight Attendants-CWA, which represents almost 50,000 attendants at 19 airlines, including United and Alaska Air Group Inc.
“This gives us time to plan for cutting down the ranks without just cutting people out of work,” Nelson said. “We’re going to be taking proactive steps to stave off as much hurt as possible in the fall.”
The union and its allies are also pushing Congress to amend the bailout legislation so that a dozen large airlines can keep about $6 billion the U.S. Treasury is currently expecting to be repaid.
The pace of any recovery for ticket sales this summer will dictate how many airline jobs are at risk, but so will carrier liquidity when balanced against their debt loads, said William Swelbar, an aviation consultant and a director of Hawaiian Holdings Inc. “It’s going to become a balance sheet story again,” he said.
Airlines like Delta and United are built atop global networks oiled by revenue-sharing alliances. Funneling corporate travelers through domestic feeder routes that can connect a New Hampshire hamlet with a Chinese manufacturing hub is where the money is. Removing those high-value passengers from the equation is akin to tossing sand in the gears—it forces carriers to quickly cut costs to make up the lost revenue.
“If you’re a network carrier, there’s your yield, and if that doesn’t come back fast, they’re really not designed to fly to Orlando and Vegas,” Swelbar said of the Big Three. The big question is “how fast does the business piece come back?”
While airlines foresee an uptick in bargain-hunting leisure travelers this summer, big money road warriors will take longer to win back. Corporations will be reluctant to assume the liability of putting employees back in the sky with Covid-19 still in wide circulation. Plus, many companies have learned to function via video conference—which is a lot cheaper than a business class seat.
“The longer we go, the more people Zoom, the slower business travel is going to come back,” said Swelbar.
Moreover, those who do choose to start flying again won’t be taking long-haul international flights, said Ben Baldanza, a director at JetBlue Airways Corp. and the former chief executive of Spirit Airlines Inc. “It’s going to be easier for people to think ‘I’ll take a quick flight from Dallas to Los Angeles, but I am not going to go to the Middle East, Asia or Europe,’” he said.