On February 5th, Southwest Airlines announced it would be sharing US$667 million with its employees through its 2019 ProfitSharing Plan. In what was a challenging year for the company, funds shared will also include compensation from Boeing connected to the grounding of the 737 MAX.
“Our Employees delivered outstanding results despite a challenging year, and it’s a pleasure to reward our People for all they contribute to our continued success…We recognize their resolve, persistence, resilience, and devotion to each other, our Customers, and our cause.” -Gary Kelly, Chairman of the Board and Chief Executive Officer, Southwest Airliens
Six weeks’ pay
According to the airline’s press release, the $667 million profitsharing award is equivalent to $1.8 million per day for the past year. Divided up amongst Southwest’s workers, it means six weeks’ pay for every eligible employee.
Some employees will receive the entire profitsharing award as a contribution to their retirement accounts as specified in their collective bargaining agreements. Southwest has also contributed $925 million in health and welfare benefits, as well as $542 million to employee retirement savings plans – known as a 401(k)s in the United States. In total, Southwest retirement and benefit contributions to employees in 2019 was $2.1 billion.
Southwest isn’t the only airline to have a profitsharing program. In fact, The Points Guy reports that Delta Air Lines would contribute $1.6 billion, or about two months’ pay, to eligible employees. American Airlines will spend $213 million on its profit-sharing program. Finally, United Airlines will pay out about $491 million.
For Southwest, this marks the 46th consecutive year that the airline has rewarded its employees with a profitsharing award. In fact, Southwest was the first in the industry to offer a profitsharing plan.
A challenging 2019 due to the MAX
It hasn’t been the smoothest of years for Southwest Airlines. In fact, during an earnings call on January 23rd, Southwest Chief Executive Gary Kelly noted that 2019’s full-year operating profit was down 28%. This equates to US$828 million less than if the grounded 737 MAX had been operational.
With its fleet of 737 MAX aircraft stuck on the ground, Southwest has had to deal with a number of issues. These include reduced capacity, delayed growth and the delayed retirement of older aircraft. According to Planespotters, Southwest had received 34 MAX jets, with three of these on lease. These planes are all now staying dry in the Mojave desert. The airline is expecting another 41 MAX jets.
In December, it was announced that Southwest Airlines had reached a confidential agreement with Boeing for compensation over the grounding of the 737 MAX. While the total was undisclosed, the airline did say it would allocate $125 million towards its’ profitsharing program.
With the 737 MAX grounding expected to be lifted by May or June, this should allow Southwest to resume some of its expansion strategies in 2020 if all goes according to plan. Maybe this time next year the airline will have an even larger profit to share with its employees.
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