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New SWA Pilot Contract?

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Feb 1, 2002
NEW YORK, May 20 (Reuters) - No. 7 U.S. carrier Southwest
Airlines Co. (NYSE:LUV - News) has offered pilots an interim contract that includes a pay raise of at least 20 percent over the next two years, the Wall Street Journal reported on Monday.

Southwest Airlines also offered to extend the current contract for two years beyond the September 2004 date when it opens for amendment, the report added.

The firm, which unlike other major airlines has posted profitable results in recent quarters as the industry still deals with the effects from the Sept. 11 attacks, has been negotiating for over a year to narrow the gap between what its pilots get paid and what competition pays to its staff.

The Journal said the interim deal with Southwest pilots include guaranteed and profitability-based raises in 2005 and 2006.

"We want to be industry average in pay but industry leading in pay and (stock) options combined," Jon Weaks, president of the Southwest Airlines Pilots' Association, was quoted as saying by the Journal.

Southwest officials were not immediately available for comment. The Journal said the pilots received the offer as a result of a 12-hour meeting Thursday with company's management.

Last week, the company's Chief Financial Officer Gary Kelly told Reuters Southwest was seeing a window of opportunity that could result in delivery of more planes in 2003 than are now on tap.
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Firm employee contracts = Firm deliveries from Boeing

Something is brewing here. My guess is expedited expansion plans sooner than later. I think they're prepping to clean the pool.

It's good to stay out of the sun anyhow! We all can't show up to class looking like George Hamilton.
I don't get to vote...being fairly new

but the few Captain's I talk to said they were not happy with the offer. I guess time will tell.
I hope the SWA pilots don't sell themselves short. My guess is they won't.

SWA Pilots May Reject Pay Proposal

Southwest pay offer may fall short - pilots union

By Kathy Fieweger and David Bailey

CHICAGO, May 20 (Reuters) - Low-cost carrier Southwest Airlines (NYSE:LUV - News) has offered an immediate pay raise and an extension of its pilots' contract until 2006, but a union executive said on Monday the plan falls short of union goals for industry-leading wages.

The only major U.S. airline to report a profit since the Sept. 11 attacks, No. 7 Southwest offered to extend the 10-year agreement at a lengthy meeting Thursday, said Wayne Stamps, vice president of the Southwest Airlines Pilots' Association.

"There is enough substance to this offer that we really need to examine it, but as an interim step," Stamps said. "It still falls short of the union's ultimate goal of an industry-leading contract."

The proposal calls for raises of about 20 percent above the pilots' current contractual rates between now and September 2004, when the existing contract will become amendable, Stamps said.

Southwest Chief Executive James Parker declined in an interview to comment on the size of the proposed pay hikes, but said they would be triggered in part by performance on operating margins. Rather than being paid hourly, Southwest pilots are paid on the basis of trips flown.

In normal industry conditions, Southwest aims for 15-percent operating margins, Parker said. The contract extension also includes stock options, he said.

"I can confirm that we've made an offer to our pilots for a two-year contract extension," Parker said. "Rather than let this issue become a festering problem, we just decided to address it early on."

Southwest, which is about 85 percent unionized, in the first quarter reported a cost per available seat mile, or unit cost, of 7.3 cents, well below that of bigger rivals. Its low costs let it absorb weaker revenues better than others as demand for air travel remains below year-ago levels.

Pilots at Southwest had no pay raises between 1993 and 1999 and instead were compensated with stock options. Since 1999, they have gotten 3 percent raises a year. As a result, pilots' pay rates are now well behind those of other top carriers.


Unlike other carriers, Southwest has been profitable since the Sept. 11 attacks. Others have posted sizable and in some cases, record losses as revenues remain well below normal.

Dallas-based Southwest's agreement with the 4,100 pilots represented by the independent union is scheduled to become amendable in September 2004.

Parker said he did not yet know what the impact of the pay raises would be on unit costs.

The new proposal has been circulated to the pilots and the union board has set a special meeting for June 10 and June 11 to complete a review and schedule a member vote, Stamps said.

The two sides have been negotiating for over a year to narrow the gap between pay for pilots at Southwest and pilots at other major U.S. carriers who fly narrowbody jets. Southwest uses Boeing Co. (NYSE:BA - News) 737s exclusively.

Northwest Airlines (NasdaqNM:NWAC - News), the No. 4 U.S. carrier, and its pilots tentatively agreed in April to a one-year extension of their agreement, which would then become amendable in September 2003. Pilots vote on the agreement from Monday to June 3.

Shares of Southwest Airlines fell 47 cents, or 2.7 percent, to $17.16 on the New York Stock Exchange, racking up losses along with most other major U.S. carriers.
I'm assuming that "industry leading" means leading for 737 aircraft...i.e. we would be talking about matching Delta 737 rates or somewhere in that neighborhood... is this the case or am I way off here? 20% seems really low for catching up to ANY contract right now...comments anyone? SWA F/O?
"We want to be industry average in pay but industry leading in pay and (stock) options combined,"

Stock options can be great...BUT. There is no doubt SWA's stock has done well over the years, but anymore I'm skeptical about stock options as compensation/retirement. Stock options that are given as a bonus and immediately executeable is something else. What makes options unattractive as they've been used in the airline industry are the execution restrictions, and the fact that they are issued at face value. Check and see how many management types get stock options at discounted values.

Since the decline of tech stocks, Enron, Global Crossing, and others, market value stock options have lost their appeal.

That's my $.02 stock option, not executable until you reach age 60,
Here's my poolie opinion, not even on the property yet, so take it for what it's worth. SWAPA's got the exact figures on thier secure website, but my buddy online shared some of the details with me. I think it is very good, and I'd vote for it if I could. Is it United or Delta? Absolutely not. Do we want United or Delta? I sure don't. I never even applied there. Anyone hired at SWA in 2001 is making about 50 grand more than anyone hired at the other guys in 2001, because they are all furloughed. As someone whose first two airlines are now out of business (yes, once in any man's life is enough to say "Hi honey, I 'm home. The airline just went out of business today and I don't have a job anymore."), I'll take the job security and knowing that I work for a great company whose management is really concerned about the welfare of their employees.
Plus, the company wouldn't offer this if they couldn't afford it and still fuel monstrous expansion. (read: hire the poolies!) When the company is making even more money in a few years, they'll pay more then too. Sure, the pilots could vote this down and go for the jugular, but at what cost? Do we really want to be extremely sickeningly rich and not enjoy going to work, or have a good relationship with the head honchos that I think we do now (again, guys on line let me know if I'm drinking too much Kool Aid here)? Or is it OK to be just plain really rich and work for the best company in America with the brightest future. As for me and my house, I'll take the later. At my own regional, we are starting to go down the other road. It's not pretty. And I've seen our major partner go to the extreme just a few short years ago. To avoid all that, knowing I may just make a little less than the other guys
but having free Kool Aid for the rest of my life, that's why I wanted to come to Southwest. But maybe I'm just a little nuts.

And don't let anyone fool you into thinking it's a bad offer either.
I could post a lot of specifics, but I'd be afraid I'd get myself into trouble. But let's just say if I were a senior captain, there'd be about 173 reasons why I'd want to vote for it.
Bullzeye PT.

Who cares about what everybody else makes..... It is the best Airline on the planet. I vote for smaller hourly + take the stock options + and when the company makes money (LIKE THEY ALWAYS DO) + bring home the fat profit sharing check.

NO Furloughs in 31 years and counting. Thats worth 50/hour for me!!!

But that's just my opinion..... I could be wrong! (but not on this one)
Hi Guys,

Anything SWA puts on the table is 100% better then my former freight dog employer. I'm happy now. This whole union thing is new to me, I'm still learning.

I can't vote yet, so I'm just asking around to get a feel from the senior guys. Nobody here wants to prevent SWA from expanding. The first year raise is only 4% over what we were going to get anyway, with the big raise in 2004. Our contract is up in 2004 and we would end up with a bigger raise then that just by staying put. I guess it would be a full section 6 negotiation in 2004.

I think the everyone likes the other stuff within the offer but want a bigger raise, right away.

did that make sense? hope so

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