Investor's Business Daily
For Southwest Flight Attendants, Jobs No Longer Labor Of LUV
Friday July 25, 10:06 am ET
By Marilyn Alva
Flight attendant Bunkie McCarthy is used to working long days. So he didn't really mind spending his day off last Thursday picketing at Bradley International Airport in Hartford, Conn.
He and his co-workers were on a mission: to protest conditions at their airline, where they say they are overworked and underpaid.
That's not unusual in the airline business, where union rabble-rousing is common. But it is unusual at McCarthy's firm, Southwest Airlines, (NYSE:LUV - News) where a storied culture has helped keep labor frictions mild.
Southwest flight attendants have hit about a dozen airports since February, leafletting passengers and telling anyone who'll listen how they don't get breaks or meals and must clean cabins between flights, when they're on their own time.
They've been seeking a new contract since their last five-year agreement ran out in May 2002.
Supersizing Southwest
The labor troubles come as Dallas-based Southwest morphs into a major nationwide carrier, yet one that continues to offer low fares and show profits. No longer is it the scrappy little short-distance point-to-point airline.
McCarthy has worked as a flight attendant at Southwest since 1986. The airline, he said, is "asking more and more from people. There's no real giving back anymore. We've kind of lost the family feeling."
More airport events are planned, as well as radio and newspaper campaigns.
That there are cracks in Southwest's internal lovefest - evidenced by the strain on its famously cheery flight attendants with the can-do attitudes - comes as no surprise to some observers.
Despite the airline industry's post-recession and 9-11 struggles, Southwest has remained profitable, thanks in large part to keeping costs down. And labor is one of its biggest costs.
On Monday, it reported a 22.6% second-quarter jump in earnings, to 13 cents a share. That figure excludes a $271 million payment Southwest received as part of the federal government's aid to airlines. At quarter's end on June 30, the firm had $2.2 billion in cash.
In contrast to other major airlines, which laid off tens of thousands of workers since 9-11, Southwest hasn't pink-slipped anyone.
Turbulent Group
Airlines as a group, meanwhile, lost a total of $15 billion in 2001 and 2002. The group is expected to lose another $7 billion this year.
United and U.S. Airways are operating under bankruptcy. American narrowly averted the same fate in April after unions agreed to $1.8 billion in annual concessions. Earlier this month, 3,100 American flight attendants got the boot.
But troubles in the industry didn't stop pilots at Delta Air Lines from turning down proposed wage cuts this week. That caused talks with the company to collapse. Nor did it prevent flight attendants at low-fare carrier AirTran to reject a new five-year contract.
Southwest flight attendants say their airline is profitable in large part due to their efficiencies and focus on pleasing customers.
Quality-of-life and compensation issues on the table include breaks, salary, vacation time and pay for hours spent working on the ground, not just in the air.
Early this year, Southwest said it wanted to increase the maximum time flight attendants could work from 10 and a half hours a day to 13 hours. The flight attendants chose to make their grievance public on Valentine's Day. Their timing was an intentional dig at the company, whose ticker symbol is "LUV" and which often uses a heart symbol in its promotional materials.
In contract negotiations, management brought up the woes of bankrupt airlines, says Southwest flight attendant Thom McDaniel. He's president of the Transport Workers Local Union 556, which represents his co-workers. "We are not a bankrupt airline and we shouldn't be negotiating a concessionary contract," McDaniel said, referring to the airline's demand that flight attendants concede to work more hours.
Although company profit was down 53% last year from 2001, Southwest still earned 24 cents a share on revenue of $5.5 billion, down slightly from the prior year. Analysts expect profit this year to grow 50%.
Chief financial officer Gary Kelly told analysts on Monday that traffic and bookings through the summer are strong. He said even business travel has improved. The carrier plans to add 17 more 737-700s to its Boeing fleet in 2004, for a capacity increase of 6% to 7%.
Southwest sees an opportunity to expand in St. Louis, in the wake of American's planned cutbacks there.
During Monday's conference call, Kelly said productivity increases would be sought "across the board." He said, "Our main objective is to keep our costs low and provide outstanding service."
That's something good management teams always seek, says David Strine, analyst at Bear, Stearns. But he says preserving flight attendants' morale is also important for Southwest. "It's an issue management needs to address and address quickly," he said. "Part of their success has been keeping a positive culture."
Even before the company's charismatic co-founder Herb Kelleher gave up the CEO helm two years ago, Southwest had lost its underdog image. It now flies to 58 cities, and operates coast-to-coast routes.
Southwest's flight attendant ranks have doubled to 7,300 since 1996, the time of the last contract negotiation.
"It's an amazingly scrappy large carrier," said Donald Schenk, president of Airline Capital Associates, an aviation advisory firm. "The fact that it is getting bigger is an ever bigger challenge for them. It is much easier to preserve a unified culture . . . when you're small and young."
Schenk says flight attendants' demands for better salaries and conditions will be a major test for Jim Parker, who replaced Kelleher. "If they don't enjoy working for Southwest, they are not going to continue to give the superior service they've historically provided," he said.
Parker, Southwest's former general counsel, is more serious than the wisecracking Kelleher. But he's also seen as an effective leader. He's successfully negotiated new contracts with five other unions, including ramp workers and ground agents.
In 2001, ramp workers also staged protests, but they didn't last as long nor were they as intense as the flight attendants'.
Still, some flight attendants are taking a wait-and-see position when it comes to Parker. "People could count on Herb to keep things friendly," said one observer. "There's a question whether Parker will be able to do the same, or will he be more like other CEOs and create an atmosphere, whether intentional or not, that is more adversarial."
Flight attendants insist they still love their company, and that Parker is not an issue, at least for now. And they haven't done anything to suggest that they are less committed to the firm. Southwest continues to log the fewest customer complaints among airlines.
Meanwhile, Parker and president Colleen Barrett are trying to keep the company's upbeat culture alive. The decade-old culture committee continues to hold "spirit" parties around the country. Like his predecessor, Parker holds several field meetings a year for the troops.
"The message he brings is that it's important to maintain focus on customer service, and that there are people nipping at our heels and we should be aware of that," McDaniel said.
Still, flight attendants say it's become harder to keep a smiling face when they don't even have time to eat or go to the bathroom.
At a field meeting this spring, one flight attendant asked whether Southwest would add onboard entertainment on longer flights. In addition to a no meals policy, it doesn't provide movies on any flight. That's in contrast to fast growing Jet Blue Airways, which has TVs in front of every seat on all its planes.
According to one attendee, president Barrett replied, "You are the onboard entertainment."
For Southwest Flight Attendants, Jobs No Longer Labor Of LUV
Friday July 25, 10:06 am ET
By Marilyn Alva
Flight attendant Bunkie McCarthy is used to working long days. So he didn't really mind spending his day off last Thursday picketing at Bradley International Airport in Hartford, Conn.
He and his co-workers were on a mission: to protest conditions at their airline, where they say they are overworked and underpaid.
That's not unusual in the airline business, where union rabble-rousing is common. But it is unusual at McCarthy's firm, Southwest Airlines, (NYSE:LUV - News) where a storied culture has helped keep labor frictions mild.
Southwest flight attendants have hit about a dozen airports since February, leafletting passengers and telling anyone who'll listen how they don't get breaks or meals and must clean cabins between flights, when they're on their own time.
They've been seeking a new contract since their last five-year agreement ran out in May 2002.
Supersizing Southwest
The labor troubles come as Dallas-based Southwest morphs into a major nationwide carrier, yet one that continues to offer low fares and show profits. No longer is it the scrappy little short-distance point-to-point airline.
McCarthy has worked as a flight attendant at Southwest since 1986. The airline, he said, is "asking more and more from people. There's no real giving back anymore. We've kind of lost the family feeling."
More airport events are planned, as well as radio and newspaper campaigns.
That there are cracks in Southwest's internal lovefest - evidenced by the strain on its famously cheery flight attendants with the can-do attitudes - comes as no surprise to some observers.
Despite the airline industry's post-recession and 9-11 struggles, Southwest has remained profitable, thanks in large part to keeping costs down. And labor is one of its biggest costs.
On Monday, it reported a 22.6% second-quarter jump in earnings, to 13 cents a share. That figure excludes a $271 million payment Southwest received as part of the federal government's aid to airlines. At quarter's end on June 30, the firm had $2.2 billion in cash.
In contrast to other major airlines, which laid off tens of thousands of workers since 9-11, Southwest hasn't pink-slipped anyone.
Turbulent Group
Airlines as a group, meanwhile, lost a total of $15 billion in 2001 and 2002. The group is expected to lose another $7 billion this year.
United and U.S. Airways are operating under bankruptcy. American narrowly averted the same fate in April after unions agreed to $1.8 billion in annual concessions. Earlier this month, 3,100 American flight attendants got the boot.
But troubles in the industry didn't stop pilots at Delta Air Lines from turning down proposed wage cuts this week. That caused talks with the company to collapse. Nor did it prevent flight attendants at low-fare carrier AirTran to reject a new five-year contract.
Southwest flight attendants say their airline is profitable in large part due to their efficiencies and focus on pleasing customers.
Quality-of-life and compensation issues on the table include breaks, salary, vacation time and pay for hours spent working on the ground, not just in the air.
Early this year, Southwest said it wanted to increase the maximum time flight attendants could work from 10 and a half hours a day to 13 hours. The flight attendants chose to make their grievance public on Valentine's Day. Their timing was an intentional dig at the company, whose ticker symbol is "LUV" and which often uses a heart symbol in its promotional materials.
In contract negotiations, management brought up the woes of bankrupt airlines, says Southwest flight attendant Thom McDaniel. He's president of the Transport Workers Local Union 556, which represents his co-workers. "We are not a bankrupt airline and we shouldn't be negotiating a concessionary contract," McDaniel said, referring to the airline's demand that flight attendants concede to work more hours.
Although company profit was down 53% last year from 2001, Southwest still earned 24 cents a share on revenue of $5.5 billion, down slightly from the prior year. Analysts expect profit this year to grow 50%.
Chief financial officer Gary Kelly told analysts on Monday that traffic and bookings through the summer are strong. He said even business travel has improved. The carrier plans to add 17 more 737-700s to its Boeing fleet in 2004, for a capacity increase of 6% to 7%.
Southwest sees an opportunity to expand in St. Louis, in the wake of American's planned cutbacks there.
During Monday's conference call, Kelly said productivity increases would be sought "across the board." He said, "Our main objective is to keep our costs low and provide outstanding service."
That's something good management teams always seek, says David Strine, analyst at Bear, Stearns. But he says preserving flight attendants' morale is also important for Southwest. "It's an issue management needs to address and address quickly," he said. "Part of their success has been keeping a positive culture."
Even before the company's charismatic co-founder Herb Kelleher gave up the CEO helm two years ago, Southwest had lost its underdog image. It now flies to 58 cities, and operates coast-to-coast routes.
Southwest's flight attendant ranks have doubled to 7,300 since 1996, the time of the last contract negotiation.
"It's an amazingly scrappy large carrier," said Donald Schenk, president of Airline Capital Associates, an aviation advisory firm. "The fact that it is getting bigger is an ever bigger challenge for them. It is much easier to preserve a unified culture . . . when you're small and young."
Schenk says flight attendants' demands for better salaries and conditions will be a major test for Jim Parker, who replaced Kelleher. "If they don't enjoy working for Southwest, they are not going to continue to give the superior service they've historically provided," he said.
Parker, Southwest's former general counsel, is more serious than the wisecracking Kelleher. But he's also seen as an effective leader. He's successfully negotiated new contracts with five other unions, including ramp workers and ground agents.
In 2001, ramp workers also staged protests, but they didn't last as long nor were they as intense as the flight attendants'.
Still, some flight attendants are taking a wait-and-see position when it comes to Parker. "People could count on Herb to keep things friendly," said one observer. "There's a question whether Parker will be able to do the same, or will he be more like other CEOs and create an atmosphere, whether intentional or not, that is more adversarial."
Flight attendants insist they still love their company, and that Parker is not an issue, at least for now. And they haven't done anything to suggest that they are less committed to the firm. Southwest continues to log the fewest customer complaints among airlines.
Meanwhile, Parker and president Colleen Barrett are trying to keep the company's upbeat culture alive. The decade-old culture committee continues to hold "spirit" parties around the country. Like his predecessor, Parker holds several field meetings a year for the troops.
"The message he brings is that it's important to maintain focus on customer service, and that there are people nipping at our heels and we should be aware of that," McDaniel said.
Still, flight attendants say it's become harder to keep a smiling face when they don't even have time to eat or go to the bathroom.
At a field meeting this spring, one flight attendant asked whether Southwest would add onboard entertainment on longer flights. In addition to a no meals policy, it doesn't provide movies on any flight. That's in contrast to fast growing Jet Blue Airways, which has TVs in front of every seat on all its planes.
According to one attendee, president Barrett replied, "You are the onboard entertainment."
