Southwest Air to Offer Buyouts and Temporary Paid Leaves

Southwest Airlines shares climb after the Dallas carrier offers buyout packages and temporary paid leaves to employees.

Southwest Airlines  (LUV) - Get Report shares were ascending Tuesday after the carrier said it was extending buyout packages and temporary paid leaves to employees.

The move is a response by the Dallas carrier to the economic shutdown caused by the coronavirus pandemic.

Shares of Southwest Air at last check were 2.5% higher at $34.42. 

"While overstaffing isn't tied 100% to capacity levels, it would be fair to assume that we are overstaffed in many areas by a similar percentage," Reuters quoted Southwest as saying in documents detailing the packages.

Southwest has not imposed any layoffs or furloughs in its 49-year history. The company said its flying capacity would probably be down about 30% in the fall.

"These programs are critical components to voluntarily reduce our workforce so that we can preserve the long-term viability of our company," Chief Executive Gary Kelly said in one of the documents.

The company said in a statement that its offering two voluntary options to employees: extended emergency time off and "voluntary separation." 

Southwest is offering leaves of a minimum of six months with benefits and 50% pay for most employees, excluding pilots, who would receive about 61% pay. 

The maximum leave period varies, and the airline said it "may return employees to work earlier if needed for operational needs."

"Even with these offerings, we can’t guarantee that we won’t have to lay off or furlough employees in the future,” the Southwest document said. “We are offering this program to take voluntary steps first.”

The voluntary separation program offers employees a cash payment determined by years of service, travel privileges for four years, and at least one year of company-paid health coverage through COBRA, unless they qualify for retiree healthcare.

"These new, voluntary programs are designed to support both Southwest’s long-term success and the goal of avoiding furloughs or layoffs – just as we’ve done for over 49 years," the company said in an email statement said.

The company said Monday that it had received $651.8 million as the second tranche of the U.S. Department of Treasury's Payroll Support Program.

Air carriers have suffered since the coronavirus outbreak began. Traffic is down about 80% year-over-year since the beginning of March and fell by as much as 96% in early April, according to the Transportation Security Administration.

Last week, American Airlines  (AAL) - Get Report said it planned to cut its management and support staff by about 30% to slash costs in response to the coronavirus shutdown.