Southwest's Labor Challenges

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Southwest Airlines this week named former FAA Administrator Randy Babbitt to become its vice president of labor relations, a new position for the low-cost carrier. Having worked 25 years as a pilot and having served 24 years as president and CEO of the Air Line Pilots Association, he would seem to bring some union credibility to the job. But that does not mean it is going to be easy.

Southwest and its Transport Workers union recently asked for federal mediation to help negotiate a new contract. While that's not unprecedented for the carrier, could be the tip of the iceberg for more difficult labor negotiations with several unions this year because of cost pressures from competitors. Southwest would not comment to me on specific issues creating its stalemate with the TWU, such as outsourcing and pay, but a spokesman for the low-cost carrier did connect the TWU standoff to a memo that CEO Gary Kelly sent to all employees in December after American Airlines filed for Chapter 11 bankruptcy protection. Citing American’s filing and the restructurings already completed by other legacy airlines, Kelly told employees the airline would need to respond to the diminishment of Southwest’s lower-cost advantage.

“We have a cost challenge, and it is one that looms large,” Kelly said, noting in particular that “our labor rates are now, far and away, the highest in the industry.” The restructured carriers emerged from bankruptcy with lower rates and better productivity than Southwest, which means the carrier will have to improve productivity and eliminate waste to “preserve” pay rates and benefits, he told them (AWIN subscriber-only story).

Flash forward to today: Southwest is pushing ground handlers represented by TWU Local 555 for concessions that would include the opportunity for the airline to do a lot more outsourcing. Charles Cerf, president of TWU Local 555, says the airline also wants to be able to hire more part-time people, and wants to tie pay raises solely to profits under a formula that would not have produced a pay hike over the past two, profitable years.

“We’re at a total stalemate,” Cerf told me at the time the request was filed.

The airline also just began negotiations with pilots, whose collective bargaining agreement became amendable in August; mechanics, whose agreement also became amendable in August; and the union for its airport customer service agents and call center employees, whose contract becomes amendable next month.

Such negotiations typically take a long time, and Kelly’s December memo suggests the talks will not be easy for an airline that has been accustomed to relatively smooth relations with its unions

 

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