SWA Voluntary Buyout?

[Cactus-Wrench]

Just came across this on the newswire...

Financial News
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Reuters
UPDATE - Southwest offers buyout packages to 33,000 workers
Thursday May 27, 7:16 pm ET


(Adds details, background)
CHICAGO, May 27 (Reuters) - Southwest Airlines (NYSE:LUV - News) offered voluntary buyout packages to most of its employees as the industry struggles to battle high fuel prices, the low-cost carrier said on Thursday.

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The No. 6 U.S. airline said employees who have worked at the carrier for at least a year -- or 33,000 of its 34,000 workers -- are eligible for the buyout.

A spokeswoman said the company had not set a maximum limit on the number of workers it would accept for the buyout program.

The Dallas-based company sent a letter to employees on Thursday offering them three different packages -- with various combinations of cash, health care benefits, and travel privileges -- depending on years of service.

Rising jet fuel prices have been a challenge for airlines, several of which have attempted to raise ticket prices and have said they may consider layoffs. Southwest has never laid off workers in its 32-year history.

Southwest has been consistently profitable while its larger rivals have posted heavy losses. Within the last week, however, Southwest raised some air fares $1 to $2 each way to combat high fuel prices.



Kind of stumped, they are and have been doing real good, lot of growth this year and on the horizon, and I guess the way I read this newswire is looking for early retirements, so cutback the headcount. I could be way off base, just my rusty gears grinding away in my head.

 

[flyguppy]

Get rid of the senior, expensive workers and replace them with the new, cheap workers.

Interesting answer to the current fuel/cost crunch.

 

[storminpilot]

This means Southwest is going to go into the Summer MEAN AND LEAN.

Summer is shaping up to be the "do or die" season.

 

[Bill Nelson]

Get rid of the senior, expensive workers and replace them with the new, cheap workers.

I don't believe this is the first time SWA has offered such a thing to it's employees. It is a fantastic way of keeping costs down while doing something to benefit their employees. What a novel idea. An airline doing something that helps employees as well as the company and stockholders.

 

[Dr. B]

Do they mean employees at all positions of the company, pilots included? Does anyone think that this will impact their proposed pilot hiring numbers?

 

[Dr. B]

Do they mean employees at all positions of the company, pilots included? Does anyone think that this will impact their proposed pilot hiring numbers?

 

[chase]

Some thoughts

SWA does have a "voluntary" buyout for employees (all to include pilots & FAs) who meet the criteria in order to do several things in my opinion.

I have heard numbers from management types that state SWA has in excess of 6-700 folks in the Customer Service, Ground Ops area. This would include rampers and others who were added after 911 to find the "right" number in which to handle all the changes.

SWA & other carriers have automated much of that process (more kiosks, online check-in, etc) & along with the more common sense approach that customers are using now in getting to & through the airport along with some of the TSA procedures being improved, the delays are not occurring as much & the demand for these persons are not as high.

I've stated these numbers before but will do it again to illustrate the point,

Dec 2002, - - 92 employees to each airplane
Dec 2003 - 85 employees to each airplane
Apr 2004 - 82 employees to each airplane (announced by CFO on webcast)
Projected ration at end of year, 78 employees per airplane
417 airplanes on property at end of '04, this would require the company to have about 32500 folks on property. At end of '03 SWA was slightly under 33,000. With more FAs & pilots to be hired & along with the few offices that will grow (Technology) a cut of 2% (660) would bring this number down to the goal of 78 & maybe even lower.

When SWA was making big money 10-15 yrs ago the ratio was in the low 70's & I believe actually in the 60 range

As for the advantages of having higher seniority employees take this offer & leave, yes the payrolls will see a benefit but I'll outline below who I think is most likely to take it.

In a nutshell & this is definitely the simplied version

3 plans to choose from

Each plan contains some elements of the following I've been told:

Insurance, lump sum payments based upon years in the company, pass privileges.

Who will be drawn to this? Who knows but my opinion is it is geared toward several niche groups.

1. Folks who were already planning on retiring either for forced retirement (pilots) or those who were just reaching that point where it made sense to do it. Why would they retire early with this plan? If on 1 July one retires & walks away from the company with one's 401K, profit sharing & stock options (not all groups have these) but if you were to retire on 30 June slightly early & could have an additiona $xx in your pocket for leaving early, would you? The company will be the one to make the determination of who will be accepted & who won't be so this extreme example may not serve as a good illustration but at some point some folks who maybe within 1 yr or more may wish to consider the additional cash that can come their way by simply retiring slightly early.

2. This next group is the biggest unknown I believe but the group that will provide the bulk are the "quiet" group of employees. These are folks who may not view SWA as their dream job either because of money, other career aspirations but have always viewed SWA as a step to their next "career". What this package will provide some of these folks is that bridge in medical insurance (not for a long period of time for sure if they haven't worked here for awhile) & some pocket change that could be used to assist in pursuing a job search, move, school costs to get set up on the new career.

3. To folks who don't need the medical coverage because they are covered by a spouse or family member, the money for years lump sum maybe more of an enticement to jump on depending on their age & time with the company. Our medical coverage is pretty good I believe in light of what is out there in the market place so the lack of long term medical coverage in this plan might not be a concern to someone who is getting it somewhere else.

I don't believe the package will appeal to many folks but to a select few it will be the nudge they needed to make a move that may have occurred anyway in the future (an early retirement or moving on to that next job).

The inevitable question will be what happens if they don't get the required number of folks to take the package? Are layoffs inevitable? I would say no. I believe in time with the addition of aircraft and new cities in the next few years SWA can grow itself to the same goal they are attempting to achieve. By promoting this program though it is hoping to do it quicker & achieve better return on the dollar to its investors, something that many folks hope SWA will return to doing since we have so many folks who are tied to the price of the stock....it has been in the upper $15 range lately after having been down to $13 only 2 weeks ago.

Enough of my CNN/FN analysis...it is all BS anyway so throw your thoughts out there & provide some other insight....good luck to all our trusted employees as they seek the correct answer for them. Cheers,

 

[SWAInflt]

From what I am hearing, the program came about because of demand for a buyout program similar to the one offered to the three res centers that were closed earlier this year.

Apparently, agents from other res centers seeing the handwriting on the wall started asking for something like this. The truth of the matter is that much of the frontline positions are vulnerable to technology...it is just a matter of time.

What happened to the res centers in Dallas, Little Rock, and Salt Lake, could easily happen to the centers in OKC, PHX, MDW, HOU, or SAT. Eventually, more and more SWA customers are going to discover that the best fares are found online. More online reservations means fewer phone reservations and ultimately fewer reservationists.

With the online check-in, self-serve kiosks, and skycap check in....it is now possible to board an SWA flight without ever having to speak with a CSA. I look for their ranks to be reduced through attrition in the coming months and years. Our Ops Agents might also eventually be on the chopping block. How easily could their workload be redistributed if necessary? I know that gate agents/CSAs park the aircraft and operate the jetways at other carriers. Don't gate agents or flight attendants board flights at most other carriers too? How is the weight and balance handled when there is no dedicated ops agent? I know our Ops Agents in large stations such as BWI or PHX work their butts off but in JAN I bet they watch a whole lotta Judge Judy...no offense to my peeps in Jackson.

At any rate, I think folks from these workgroups who might have planned on staying with SWA but are seeing the handwriting on the wall might be tempted to take the money and run.

 

[throttlejockey]

The only problem with "forced" re-distribution of employees is the potential for morale problems. I am sure that SWA has the experience with this.

I know of many carriers that have gate agents that also marshall aircraft. The only problem is that with SWA's turn times, it will be very difficult to do both jobs at gate and ramp job. Same with FA's boarding the aircraft. It is very difficult to close-out a flight, and be in the cabin at the same time.

In terms of W & B, I think that SWA could move that responsibility to the flight crew, who could then transmit the data back via ACARS. As a pilot, I would rather be in the W & B calculation loop, than out of it.

tj