DALLAS -- Southwest Airlines will cut pay for nonunion workers in January and says union workers must accept less pay or face furloughs next year as the pandemic continues to hammer the airline business.
Chairman and Chief Executive Officer Gary Kelly said Monday that unless the federal government gives airlines more money, Southwest will have to sharply cut spending to avoid losing billions of dollars every quarter until a coronavirus vaccine is widely available. Air travel is down nearly 70% from a year ago.
Kelly said he won't get a base salary through 2021 and nonunion employees will see a 10% pay cut Jan. 1 to avoid layoffs through 2021. Southwest will negotiate similar cuts from union workers, who represent about 85% of the workforce.
"We would have to wipe out a large swath of salaries, wages and benefits to match the low traffic levels to have any hope of just breaking even," Kelly said in a video to employees.
Union officials said the company should find options other than pay cuts.
Southwest, the fourth-biggest U.S. airline by revenue, has received nearly $3.4 billion in federal payroll support. The company had $14.5 billion in cash and short-term investments at the end of June.
The airline recently said it is burning about $17 million a day. It lost $915 million in the second quarter and borrowed billions while cutting back on flights to conserve cash.
Employee costs often jockey with fuel as the largest expense for airlines, and Southwest has warned since April that plummeting demand might force it to seek labor concessions or end its streak of avoiding layoffs and pay cuts.
Southwest Airlines Co. had about 61,000 employees in June but at least 4,200 agreed to leave. At least 12,500 more took long-term leaves of absence.
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Pay for union pilots, flight attendants, mechanics and ground workers is governed by long-term contracts, but Kelly wants "reasonable concessions" by Jan. 1.
Southwest says it has never laid off employees in its roughly 50-year history. The Dallas-based carrier -- along with Delta Air Lines -- persuaded thousands of workers to take early retirement or buyouts but avoided layoffs or furloughs. In contrast, American Airlines and United Airlines furloughed 32,000 workers between them last week.
All the carriers are lobbying Congress and the White House for another $25 billion in taxpayer money to pay workers for the next six months. That's on top of up to $50 billion in cash and loans that Congress approved in March. Kelly said pay cuts would be rescinded if Congress approves more money.
The president and chief negotiator for the Southwest pilots' union said in a memo to members that they will fight to prevent furloughs. They said Southwest can find other ways to save money, and that it has enough cash to last more than two years.
The pilots union said in a statement that it recognized "the seriousness of the situation we are in" and said it would meet with management.
"However, agreeing to discussions is very different than agreeing to concessions," the union said, warning that there were limits to how much the company could cut costs "on the backs of labor."
Southwest flight attendants began contract negotiations in late 2018, long before the pandemic. Transport Workers Union local President Lyn Montgomery said Kelly's remarks should galvanize union members to push lawmakers for more federal relief "before we go down the road of cracking open our contracts and taking out pay and quality-of-life benefits that took us decades to earn."
Montgomery said 5,400, or 32%, or Southwest's 17,000 flight attendants have already left or taken extended leaves, and those who remain are stressed.
"They are worried about both jobs and [contract] concessions," she said. "They are worried about working during covid-19."
A moderate uptick in domestic travel that began in August continued through September, and Kelly said he hoped improvements would continue each month through year-end. But it will be "far from closing the gap," he said.
"It pains me that through no fault of any of you, we have to take these next steps," Kelly told employees. "it's just a law of nature: We're going to have bad times, and going to have to sacrifice in the really bad times. It is really bad."
Information for this article was contributed by David Koenig of The Associated Press and by Mary Schlangenstein of Bloomberg News.