Southwest Sends Furlough Warnings to 403 Workers

Southwest warned 403 more workers that they may be furloughed as the airline struggles with the impact of the coronavirus.
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Southwest Airlines  (LUV) - Get Report has warned 403 more workers that they may be furloughed, as the airline struggles with the impact of the coronavirus.

The Dallas carrier is "in discussions with union representatives from all of our contract groups to negotiate cost reductions to help offset an estimated billion-dollar cost of overstaffing that we currently face," the company said in a statement. 

"The workgroups that approve these reductions will receive protection from furloughs for all of 2021." 

But the airline said it hasn't made "meaningful progress" in talks with the Aircraft Mechanics Fraternal Association. So it sent the 403 notices to mechanics and other workers.

Any involuntary furloughs will take place next January, "unless Southwest reaches cost-saving agreements or the government enacts a satisfactory Payroll Support Program extension," the company said.

Southwest said Nov. 6 that it sent furlough warnings to 42 parts inventory workers.

Southwest shares recently traded at $46.28, up 1.4%. The stock has slipped 13% year to date, as the coronavirus pandemic has kept travelers at home. That compares with a 12% increase for the S&P 500.

Morningstar analyst Burkett Huey offered positive comments about Southwest after its earnings report last month.

“No-moat-rated Southwest Airlines reported a difficult third quarter, as the pandemic has halted most air travel in the U.S., but it is optimistic that the nascent recovery in passenger traffic will last until a covid-19 vaccine allows for a much more robust recovery,” he wrote.

“We are raising our fair-value estimate to $44.50 per share from $44 on a slightly better near-term revenue environment and slightly lower near-term expenses, particularly fuel expense. 

"We’re anticipating that a covid-19 vaccine will be authorized by the end of 2020 and be well distributed by mid-2021, which will allow a robust recovery in commercial aerospace.”