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Southwest to avoid first layoffs as relief package clears

Justin Bachman
Bloomberg

Southwest Airlines Inc. said it would rescind plans to cut jobs and wages next year, now that new federal payroll support has been approved, averting what would have been the first worker layoffs in the carrier’s history.

U.S. airlines will receive $15 billion to pay workers as part of the package President Donald Trump signed into law Sunday. The measure funds employee wages through March 31. Southwest could receive $2 billion from the law, Bloomberg Intelligence estimated last week.

In this Sunday, May 24, 2020, file photo, people walk to a gate to board a Southwest Airlines flight to Orlando, Fla., at Kansas City International airport in Kansas City, Mo.

The pandemic forced Southwest to take “actions that we’ve never even considered before in order to save our Company,” Chief Executive Officer Gary Kelly wrote in a memo to employees late Sunday. “Thankfully, as a result of this crucial aid, we can breathe a sigh of relief, knowing that we will not be forced to follow through with those steps.”

Airlines are grappling with the worst financial crisis in history as the pandemic continues to rage globally. U.S. daily airport traffic set a record during the pandemic on Sunday, with 1.28 million people screened as part of Christmas holiday travel, according to Transportation Security Administration data. Volume generally remains only about 35% of last year’s levels, however.

In October, carriers including American Airlines Group Inc. and United Airlines Holdings Inc. laid off about 32,000 employees after a previous federal aid package lapsed. Those employees are expected to be called back now that the new funding has been approved.

Southwest had been seeking $500 million in labor-cost savings, with the first of nearly 7,300 job cuts expected in January. Additional rounds were possible in March and April. The new federal aid will preclude job cuts for all of 2021, Kelly said.

The Dallas-based airline remains overstaffed in “many areas,” he wrote, encouraging employees to use voluntary time-off programs when those are available.

Southwest rose less than 1% to $46.59 at 10:35 a.m. Monday in New York. The stock had dropped 14% this year through Dec. 24, the smallest decline on an S&P 500 index of U.S. airlines.