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Southwest Looks to Steer Around Pandemic Related Layoffs

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Southwest is looking to steer around what its competitors are finding very difficult to avoid amid the worst hit to the aviation industry in its history: pay cuts vs. furloughs and layoffs.

The Dallas-based airline said on Monday that it is asking its labor unions to accept pay cuts to prevent furloughs and layoffs as federal aid expires. Airlines were barred from furloughing or laying off workers until Oct. 1 under the terms of the $25 billion in federal aid they received earlier this year.

In a video message to employees, Southwest CEO Gary Kelly warned that the airline would have to wipe out a large swath of salaries, wages, and benefits to match the low traffic levels, “to have any hope of just breaking even.”

Southwest is looking to take a different route than its rivals in navigating the ongoing pandemic and its unprecedented impact on airlines’ balance sheets, seeking to avoid the types of mass layoffs that rivals including American Airlines (AAL) - Get Report and United Airlines (UAL) - Get Report have already said they will have to implement if Congress doesn’t come up with a new industry aid package.

Kelly said on Monday that Southwest’s revenue remains 70% below where it would normally be, and that quarterly losses could be "in the billions" until an effective vaccine has been widely distributed. Kelly himself won’t receive a salary through the end of 2021, while 20% pay cuts for senior executives will continue through next year.

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