Southwest Outlines Its “Most Generous” Early Retirement Package

Employees at Southwest Airlines were yesterday offered early retirement and extended leave packages as the airline tries to avoid large scale forced layoffs. Right now, the provisions of the CARES Act are keeping jobs safe, but that ends on September 30. With passenger demand still expected to be low well into the end of this year, Southwest Airlines wants to avoid a situation where it has thousands of surplus employees.

Southwest Airlines has offered its employees early retirement and extended leave opportunities. Photo: Southwest Airlines

Southwest Airlines trying to avoid forced layoffs later in the year

The Dallas-based airline has over 60,000 employees. More than half of its 750 aircraft are not flying. According to The Dallas Morning News, passenger numbers at the end of May were down 88% on the 12 months prior.

Southwest Airlines is receiving approximately $3.2 billion via the CARES Act, ensuring airlines keep paying their employees. But, under the deal, Southwest cannot forcibly layoff employees while receiving this assistance. This only extends until the end of September. After that, mass layoffs are expected across the airline industry in North America.

To avoid this, Southwest Airlines wrote to employees on Monday, encouraging them to consider early retirement or extended leave. The airline would look after them, they were assured. The document offered “the most generous buyout package in our history.”

Southwest Airlines calls the retirement offer “the most generous in our history.” Photo: Southwest Airlines

Early retirements and extended leaves on offer

How generous the offer would be will depend on how long an employee has worked at Southwest Airlines. For example, if they worked at the airline for more than ten years they’d be eligible for one year’s pay, one year’s health insurance, and four years of travel benefits. Pilots would get five years of pay based on flying 67 hours a month.

Options will be available for six, twelve, or eighteen months of extended leave. While on leave, employees will receive half their usual pay. Health and travel benefits would be retained. Pilots on leave would be paid at the rate of 55 flying hours per month.

While the CARES Act safety net ends on September 30, early retirements and extended leaves may begin before then.

“It is clear that for the near future, we are currently overstaffed. It’s imperative that we bring our employee numbers down, voluntarily,” said Southwest Airlines’ CEO Gary Kelly on Monday

Southwest Airlines wants to rightsize its workforce before the end of September. Photo: Southwest Airlines

Southwest Airlines expects to go into the northern 2020 autumn with capacity down by around 30%. While Southwest hasn’t cut its capacity as much as other US carriers, Mr Kelly says his airline is in intensive care.

“We’ll compete hard for customers, understanding it will be a brutal, low-fare environment as there are far more airline seats, and there will be for some time than there are customers.”

Southwest Airlines not alone trying to downsize workforces

Southwest Airlines isn’t alone in attempting to preempt mass forced layoffs later in the year. In the last week, United Airlines, Delta Air Lines, and American Airlines have all encouraged early retirements or extended leaves.

Delta Air Lines has offered cash payments, continuing healthcare, and travel benefits in an attempt to downsize its workforce of 91,000 employees.

“Every voluntary departure helps to protect the jobs of those who most need them,” said Delta’s CEO Ed Bastian.

Back at Southwest Airlines, Gary Kelly and his crew are battening down for a turbulent short term future. Mr Kelly said;

“Given our current situation, my No. 1 goal is to protect the future of Southwest Airlines and do my best to provide job security for our employees.”