What makes SWA great?

[backflip]

Besides SWA being one of two majors hiring this year, why do so many people want to work for them? My understanding of SWA is that flying 1000 hard hours a year is not uncommon, their pilots are under paid, pay for training requirement (737 type required prior to hire) and no retirement fund. Granted, they are very stable, are making money, and will be around for the long run. But if you compare them to say FedEx, who is also hiring, you will fly half as much, make significantly more money, no pay for training, and a fantastic retirement, I’m having a difficult time seeing what all the hype about SWA is. Southwest people seem to love it, but everyone that I know that flies for another major can’t believe that I’m even considering SWA. At times I get the Southwest bug and think it’s time to get a 73 type in hopes of getting an interview and hopefully be hired. Maybe by doing that I will begin to feel more of that Southwest love. At other times I think that I’m crazy and just jumping on the SWA bandwagon because they are hiring. I’m not trying to put down SWA, just trying to find out why others like it so much when it appears that SWA pilots are underpaid and overworked. Maybe that way I can figure out what I need to do.

 

[Badda BING]

My reason

Financial Strength
Job Security
SWA morale (fellow employees)
Profit Sharing

I believe you just stated your reasons. You need to weigh these factors into your career expectations and you'll find the answer.
Read the book "NUTS" and see if you're a match with the SWA culture. Buy the book at AMAZON.com or Waldenbooks. I tried Barnes and Noble but no luck!
If you're still asking why, it's probably not for you!
Check out the polls.

Tony

 

[chase]

Reply to backflip

badda-bing said it well. It is a unique company. I tell folks who are interested in SWA or any airline, write down the 5 things you most want out of your next airline in order of priority, i.e. pay, security, retirement, benefits, quality of life, willingness to work, work atmospher, etc.

Then honestly look at the airline that matches those desires & go for it. Most airlines have the same business model except for SWA. Because of that priorities in the company are different & therefore their priorities in how they operate is radically different. Coming in & whining about the business model or saying we're not being paid enough is counterproductive until it comes time for the negotiations.

They are nearing & our folks are gathering some rather convincing info to offer to the company that justifies raises.

I believe things can & will change within our next contract & not impact the business model though. I'm optimistic SWA can still be a juggernaut & pay more to their pilots along with improved benefits, not just to us but to all employees. I believe logic & reason will displayed by both parties in the negotiations & a reasonable solution will be found. I feel strongly about this because even if SWA had been paying its pilots industry average pay last year, SWA still would've made money for the year!! An even stronger case that SWA will be able to afford a pay raise for its pilots (and other groups) & expand at a reasonable level!! That last part is the key, "STILL EXPAND AT A REASONABLE LEVEL".

I don't want to go too deep into this but for folks who think things will remain the same for pilots pay wise, after '04 I'm confident things will improve dramatically. Your friends will still find fault with SWA somehow but that's OK. We'll still be doing OK! cheers

 

[dhampton]

What makes SWA great?

The people.

 

[Mr. Irrelevant]

Although I am very green by piloting standards I know a thing or two about retirement plans. I'm not specifically pointing a finger at backflip or anyone specifically for that matter however I'm always surprised when I hear someone say "Southwest has no retirement plan"! I am not an employee there but it is my understanding from trolling the board for the last couple/few years that there is a very generous 401k. If I'm correct and that may be a very big if, the 401k match by SWA is 100% up to the first 8% of salary. Someone here will probably let me/us know if that is correct or incorrect.

By my rough estimate, and I mean rough, assuming a 9% annual return and upgrade after 5 years with assumptions as to salary in each year(starting at 130k as 6th year Captain and growing 5k per year), an 8% allocation by the pilot would leave close to $1.2 million after 25 years. I haven't even assumed any rates of return on the profit sharing. Again, I believe without going into details that I was very conservative with the salary and the return to an extent. Although possibly this isn't what a lump sum payout from another airlines pension plan might be it seems ok to me. Plus as an added risk management measure, once vested this is an employee's cash. I don't believe that is always the case with pension plans.

If anyone can shed a little more light on the SWA 401k plan maybe it will be of benefit to many here. Thanks for listening (reading)!


Mr. Irrelevant

 

[chase]

Retirement Info

Here goes:

1. Profit sharing: No guarantee but here are some useful numbers for planning:

24 YEAR AVERAGE 10.35%
TRAILING 10 YEAR AVG. 10.48%
PRESENT CONTRACT
YRS. 1994 - 2004 11.93%

Percentage of your w-2 statement, all wages, salaries is distributed to EVERY person in the company. You work more, you get more.

this year just announced 11.7%; last year 16.6
Money can be placed all in company stock, distributed into about 8-10 different mutual funds representing a variety of investment philosophies. One is vested (keep all the money or transfer it if you go somewhere else) after 5 years. Leave earlier, money goes back into the pool for re-distribution. Can't touch money until 59 1/2 without penalty. Money is not taxable as long as it stays in the ProfitSharing account. Money can be rolled over into a retirement account at that time with no tax implications (I believe). Money is not taxable as long as it stays in the ProfitSharing account. You must have worked an entire calendar year (1Jan-31Dec) to get any money. Hired 30 Dec, good, hired 2 Jan, bad, gotta wait an nearly 2 years to get money in your account. Money is already set aside, will not loose it if SWA goes under. No prohibitions on keeping money in company stock with this money.

2. 401K - Company doesn't put money into fund unless you do. It will match up to 7.3% of whatever you put in. Max for anyone is 15% of salary up to $11,500 this year I think. SWAPA picked funds for pilots to choose from. One from all the major food groups. 25% of money can be put into a separate Schwab account to play the market if you'd like. You can not buy SWA stock with this money except through one's Schwab account. Recent article in Forbes or Kiplinger highlighting the bennies of our 401K SWAPA program. Highlighted a FO with us I think. good articles, more details. While we're not Enron-proof (Schwab accounts can have SWA stock) it is a good cross section of funds but many folks wish we had more. SWAPA 401K committee reviews & picks the funds for all of the pilots to choose from.

3. Stock options - forget those for those who aren't here yet. They were meant as part of our salary & not retirement. For those who have 'em, they're great, for newer folks like me, not much value in them now, maybe later, hopefully

When you retire at whatever age you walk away with your 401K and profit sharing, nothing else. If you haven't participated in 401K then you're going to be a little short. Long career, things will go well for those guys/gals (20 years or so), if you have less than 20 years then things get a little dicey in terms of other retirements in the industry.

hope that helps, cheers

 

[chase]

Pay scale for those wondering what it is & planning for retirement. Hopefully a new contract will be in place sometime in '04!! This is not an hourly rate but a "trip rate". Multiply the dollar figure by 1.189 to compare hourly rates.

Service
9/1/2001 9/1/2002 9/1/2003 9/1/2004
Capt Pay

Yr 1$109.68 $112.97 $116.36 $122.17
Yr 2 $111.02 $114.35 $117.78 $123.67
Yr 3 $112.37 $115.74 $119.21 $125.17
Yr 4 $113.71 $117.12 $120.63 $126.67
Yr 5 $114.97 $118.41 $121.97 $128.07 Usually earliest upgrade point, some a little before 5, most around 5
Yr 6 $116.41 $119.90 $123.50 $129.67
Yr 7 $117.74 $121.27 $124.91 $131.16
Yr 8 $119.09 $122.66 $126.34 $132.65
Yr 9 $120.44 $124.05 $127.78 $134.16
Yr 10$121.77 $125.43 $129.19 $135.65
Yr 11$123.12 $126.81 $130.62 $137.15
Yr 12$124.46 $128.20 $132.04 $138.64

F/O Pay

Yr 1 $32.90 $33.89 $34.91 $36.65
Yr 2 $55.51 $57.18 $58.89 $61.84
Yr 3 $61.80 $63.65 $65.56 $68.84
Yr 4 $68.23 $70.27 $72.38 $76.00
Yr 5 $74.73 $76.97 $79.28 $83.24
Yr 6 $76.83 $79.13 $81.51 $85.58
Yr 7 $77.71 $80.04 $82.44 $86.56
Yr 8 $78.60 $80.95 $83.38 $87.55
Yr 9 $79.49 $81.88 $84.33 $88.55
Yr 10$80.37 $82.78 $85.27 $89.53
Yr 11$81.26 $83.70 $86.21 $90.52
Yr 12$82.14 $84.61 $87.15 $91.50

 

[StarrBuck]

Chase,

Firstly, I want to thank you for all that you do for this board, it is really nice to have someone "inside" who can answer our questions!! Its nice to see folks who don't forget about those behind them.. I have a question for you about the 401K.. A friend of mine a month ago or so (SWA FO) was explaining that the 401K was matched at a rate of 100percent up to 7.3 percent of your income for the year? Sounds like you are under the impression that they put in 7.3% of what you put in.. Am I reading this correctly?

Thanks,

S.B>

 

[bigred]

StarrBuck,
As an example, if you make $10,000 and contribute 7.3% you put in $730. Southwest will also put in $730. If you contribute 15% you put in $1500 and Southwest will contribute $730. They match your pay up to a 7.3% contribution.

Backflip,
If Southwest sucks so much, DON'T APPLY. No one is holding a gun to your head making you come here. You don't have to get a type rating, you don't have to interview, and you don't have to fly 12 legs a day between Tulsa and Little Rock for five dollars a day. Just put your app in for Delta, United, American, or even Fed Ex for that matter and I'm sure they'll get right back to you.

 

[Daysoff]

Disclaimer: I do not work for SWA and I am not a financial expert.

This is how I believe the 401K works there (as most places)

The 401k match is a percentage of your pay. Imagine you make $2000 a month (gross pay) and are paid twice a month. Each check is therefore $1,000 (gross). If you contribute 7.3% to your 401K that would be $73 taken out of your check. Now the company will match 100% of that ($73) to give you a grand total for the pay period of $146. Now, if you want you can contribute up to 15% ($150 using the same example above) of your pay to the 401K plan but the most the company would contribute would still be the 7.3% or $73. Also, if you only put in 5% ($50) the company will match you 100% of your 5% (ie: $50).

You should always put in at least as much as the company will match.

Once again, I am no finacial expert but this is how I believe these programs work.

Question for Chase:

How is the profit sharing money tax free? Is it that it grows tax free until you take it out (like in a 401k) or is it taxed prior to going into the account. Either way, I assume it has to get taxed one way or the other as there are no free lunches. Just curious and happy for you that you are working.

 

[inline]

It's really simple: SWA hires a good share of civilian pilots, FedEx mainly military. If you're civilian, SWA is probably the only option. A good one at that.

 

[XNav]

Daysoff:
The profit sharing is a retirement fund and is taxed precisely like a 401K. Company contributions to the account are not counted as income, it grows tax-free and it is taxed upon withdrawal. You are not vested in the profit sharing fund until you reach 5 years of service, i.e., if you quit at 4.99 yrs of service, you cannot take your p.s. balance with you. The only thing I'm not sure of is what age you need to be before you can draw on the account without penalty.

 

[chase]

answers to 401/ps ???s

Starbuck,

Thanks for the kind words. Others on here from SWA do the same thing. As they say in the business, "it's a team sport". I too just had some friends/acquaintances not make the last DB & was disappointed. I know everyone interviewed doesn't make itt but hopefully something I say on here may help someone else out. If so, that's as good as it gets. Hopefully more in the future will too. As to your questions.

The explanations were correct. First 7.3% I contribute, the company matches. The rest up to 15% is all mine, no company. I'd do the math but it makes my head hurt. The other guys were right on (for a PE major, it looked close).
Backflip & days off were correct in terms of the 401K explanation.

Daysoff,

My apologies for not making clearer. Here was my comment:
>Money is not taxable as long as it stays in the ProfitSharing account.

I added immediately after that the money could be rolled into a retirement account. I should've added when it is withdrawn from the PS account or after it is rolled over into another retirement account & then taken out, the money is taxed at whatever rate you're at. My apologies for the confusion. US does get some of it!


As to when PS money can be pulled out without penalty, the union web site says no penalty after 59 1/2. Stock options are something that can be exercised at anytime & taxed as regular income. Again, not a major issue for younger folks (time with SWA, not birth order definitely!) like me or you if you get hired. Future contracts may have options & the key to them is the length you wish to hold them for & the "strike/option price" when they are awarded to you. Just for example to make your head swell:

As a 3rd yr FO I received a grant of 1013 options to buy SW stock at approximately $19. & then sell it at a later date. For example selling it today would net me a total of a little over $2000 after taxes.

A third yr FO received on the signing date of the contract in '94 3,216 shares. The stock price was around $17 then. With all the splits (caused over time & good business practices + splits in the stock), those shares now have a price basis of $3.95. Selling those same shares at todays stock price of $22 would result in an after tax amount of approximately $41,000. That is only one year's worth of stock options, assuming he hasn't exercised any of them over the past 7.5 years. I'm not trying to bad mouth the guys who got it, quite the contrary, I believe the older guys have done very well & took ALL of the risk since there was ZERO pay increases for the first 5 years of the contract. They deserve it! There just wasn't enough foresight into what effect having different strike prices, amount of shares, etc. would have on creating so many different pay scales for each year group hired. In essesence that is what has happened. Again, don't get too bogged down with all of this, focus on the bigger picture.

This will get fixed, SWA will continue to grow & we will still continue to have the best pool of pilots to choose from & SWA is thankful for anyone who even gives it a passing interest, regardless of your reasons. Sorry to ramble.
cheers, God bless,

 

[enigma]

I don't work for SWA even though I have tried to gain employement there. I do have many friends there, and my best answer to your question would be that the reason people want to work at SWA is that SWA does a good job of making their employees feel like they are a valuable part of something special. It's that simple. Most of my career was in corporate. I worked for a very dynamic billionare. His employees worked 30% longer, and 30% harder, for 30% less. But we knew that we were a part of something special. In the industry that he was a part of, people climbed over each other to get to work for this individual just to be associated with his dynamism.
In other words LEADERSHIP.
Herb provided that kind of atmosphere, he set up a company that was something special, and people want to be a part of it.

hope this helps
8N

 

[V1Cutt]

Cockpit LUV

One thing that many people miss in the whole "why SWA?" thing is the Captain-FO relationship. Think about it: you have about 25 years to go in this industry, spending thousands of hours alone in a cockpit with your co-worker. SW tends to hire people who are good at "getting along", they know a thing or 2 about judging personalities. I have heard tons of stories from guys at nearly every major about this a**hole Captain and these b*tchy flight attendants. Let's face it, the big airlines have in the past, hired SOLELY based on experience and could care less how well liked these people would be. I'm not saying that everyone at SW is the coolest guy/girl I ever met and I'm not saying that there are not great people to fly with at every major, but based on personal experience and listening to some of the horror stories, your NO-FLY list will be a lot longer anywhere else. Remember, you have to be locked in there with them for that 6 hour coast to coast ,or God-forbid, transatlantic flight.
For me personally, the money is a non-issue. Six figures to fly jets around the USA is unbeatable by any profession. Being happy on 99% of my trips for the next 25 years and knowing that I will have a job tomorrow is what counts most.

 

[inline]

Well said, V1cutt!

 

[backflip]

To all that have replied--a big thanks! The info has been helpful, and makes me feel better about spending $8K for a 737 type. Hopefully it will pay off. I would love to work for SWA.