Southwest Airlines CEO Gary Kelly said all employees need to take a pay cut of 10 percent starting January 2021 in order to avoid furloughs and layoffs during these difficult times when the airline industry is hit by the effects of the COVID-19 pandemic.
The US airlines had agreed in April to the Treasury’s conditions such as prohibitions against involuntary furloughs and reductions in employee pay rates and benefits through September 30, 2020, until when the CARES Act program supported the industry with the six-month long Payroll Support Program (PSP).
In a video message to his employees, Gary said the expiry of the PSP last month will need them to go in for employee pay cuts. The airline has already raised billion of dollars in financing and taken huge levels of debt as well as cut costs and spending.
Gary also said his already reduced base salary will now be zero and the board of director compensation and senior executive base pay has already been cut 20 percent. All these cuts will continue through next year.
Despite all these, the airline has undergone a 70 percent revenue loss due to reduced capacity. Gary had confirmed in July that there would be no involuntary furloughs or layoffs through the end of 2020.
Starting January 1, Gary has called for a 10 percent cut on salaries and wages of all remaining leadership groups and all other non-contract employees. The airline is also working with the union for similar concessions for union contract employees.
The industry had hoped the PSP to be extended until at least March 2021. Gary confirmed the pay cuts will be discontinued or reversed if the PSP is extended to March. He added that the pay cuts will snap back to the current levels at the end of 2021.
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