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Southwest Warns of Airline’s First Round of Furloughs Amid Pandemic
While the demand for travel continues to slowly increase around the world, things are not all positive in the airline industry. Dallas-based Southwest Airlines is facing the possibility of having to carry out furloughs unless passenger numbers change drastically.
While the exact number of possible layoffs was not announced, it would mark the first involuntary layoffs in company history. To prevent these layoffs, Southwest CEO Gary Kelly said that passenger numbers would have to triple by year-end, according to Reuters. While not for Southwest Airlines specifically, the TSA screened just under 750,000 passengers on June 12. This number is 71.8% lower than the same day last year.
COVID-19 Cases Surge in Key Southwest Cities
Numerous states in which Southwest has a major presence have seen spikes in new cases recently, including Florida and Texas. In a letter to employees, Kelly said, “we are still overstaffed, and COVID cases continue to rise.”
Kelly also stated that travel restriction in some states related to new cases “aren’t positive developments for our business, and we are concerned about the impact on already weak travel demand.”
Southwest’s layoff warnings come a week after United Airlines sent furlough warnings to nearly 36,000 employees. Fellow Texas-based American Airlines has said that they will have nearly 20,000 excess employees.
The airline is offering voluntary leave packages including early separation and long-term leaves. Employees of the carrier will have until July 15 to apply for any leave package they wish to take. Kelly stated that furloughs were the last choice, saying, “Although furloughs and layoffs remain our very last resort, we can”t rule them out as a possibility in this really bad environment.”
U.S. airlines are not allowed to make layoffs until at least Oct.1 following provision of the CARES Act that was passed by Congress. Southwest has received $3.2 billion to support payroll costs during the pandemic also has the ability to take another loan should they wish. The loan of $2.7 billion is already agreed upon by the U.S. Treasury and just needs to be accepted by the airline if they want to take it.
Due to Southwest’s point-to-point route structure, it has flown a significantly higher percentage of its normal schedule than other airlines during the pandemic. While traditional hub-and-spoke carriers have been able to drastically cut flights using their hubs, the carrier has not had this same luxury. Southwest will operate just 32% fewer flights during July than when compared to last year and operated nearly 38% of their normal schedule in May.
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