Southwest Airlines Offers Employees a Buyout Package

Dallas-based Southwest Airlines is offering what it describes as the “most generous buyout package in our history” in an effort to avoid layoffs or furloughs this fall.

In a document shared with employees Monday, Southwest detailed early retirement and extended time off packages designed to “ensure the long-term success” of the airline, according to a news report posted by The Dallas Morning News.

Most Southwest employees with more than 10 years at the company would get a year’s pay and four years of flight privileges if they opt for early retirement. Pilots would get paid about two-thirds of their average salary for five years or until they hit 65, whichever comes first. Early retirees would also get a year of company-paid health insurance.

Southwest and other airlines are in a race to cut costs before Sept. 30, when obligations under payroll protections grants from the stimulus package end. Until then, airlines that took grants and loans can’t lay off employees, cut salaries or furlough workers. 

But airline executives don’t expect traffic to rebound for at least a year. Employees have until July 15 to apply for the programs.

Airlines have also agreed to suspend dividends, share buybacks and limit executive pay. Other airlines, including Fort Worth-based American, are making similar pleas to employees to take voluntary time off and early retirement. Last week, American said it would reduce its management and support staff by 30%.

Eligibility for Southwest’s leave and retirement programs will depend on how many workers the company needs in each workforce group. Southwest Airlines CEO Gary Kelly has said air traffic will probably be down 30%.

Air carriers have taken a brutal hit from the COVID-19 pandemic. 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. 

Even with a recovery in the last few weeks, passenger traffic was still down about 88% last weekend compared to the same weekend last year.

Southwest, which has about 60,000 employees, is also offering an extended time away plan for 6, 12 and 18 months that would give employees 50% pay along with health and flight benefits. The plan for pilots would pay about 60% of their regular pay during the extended leave program.

Southwest has parked more than 400 of its 750 airplanes due to the COVID-19 pandemic, and is reducing capacity on planes by a third in order to give passengers more room for social distancing. Still, Southwest is planning an aggressive schedule for November and December to try to capture market share from competitors.