Southwest Airlines CEO Gary Kelly wants to cut employee pay rather than lay off staff as Washington drags its heels on providing another round of relief to the beleaguered industry.
“[The pay cut] is only because the payroll support is expiring here, and there’s just no certainty it will be extended through March,” he said on CNBC on Tuesday.
The CARES Act enacted in March provided the airline industry $25 billion in aid as long as no workers were furloughed before Thursday. The airline executives have asked for an additional $25 billion in aid, which would be expected to help keep workers employed through March 2021.
Kelly said the payroll is the “largest cost opportunity that we have” and that he is looking “for savings of at least half a billion a year.”
If what he has proposed comes to fruition, it will be the first pay cut in the company’s history. The airline has never furloughed workers, Kelly said.
He added that the pay cut would be for 2021 and “snap back” at the end of next year, but he did not define what he meant by that phrase. However, he seemed to suggest that compensation would return to normal levels at the end of 2021.
Kelly will need the support of unions to cut workers’ pay.
“We can furlough employees without negotiation, but if we’re going to make any other changes to the contract, that has to be negotiated,” he said.
If discussions go well with the unions, employees will see their pay cut on Jan. 1.
American Airlines and United Airlines sent furlough notices to more than 32,000 workers earlier this month as pandemic aid expired and Washington leaders failed to agree to additional relief.
Alaska Airlines also announced that over 500 jobs would be furloughed, according to local news.
House Democrats on Friday attempted to pass an airline relief package, but Republicans blocked it.
House Speaker Nancy Pelosi on Friday blasted House Republicans for blocking a stand-alone bill that would extend pandemic aid to airlines.
“Democrats offer legislation to save lives and livelihoods, only to be met by more Republican obstruction. Either Republicans are not serious about meeting the staggering health and economic challenge facing our nation, or they do not care,” the California Democrat said.
Republicans objected to a request by House Transportation and Infrastructure Committee Chairman Peter DeFazio, a Democrat from Oregon, for unanimous consent to pass his stand-alone bill that extends the Payroll Support Program for the airline industry.
