Last December Southwest Airlines CEO Gary Kelly sent a message to employees warning them that the carrier faces a labor cost "challenge" because of the cost-cutting that its competitors have done via the Chapter 11 bankruptcy protection process. “Our labor rates are now, far and away, the highest in the industry ,” Kelly wrote then (AWIN subscriber-only story). “Through bankruptcy, very large New Airlines have emerged with lower rates than us and better productivity.”
At the time, Kelly suggested the carrier could achieve that by improving productivity and eliminating waste, while "preserving" pay and benefits. But its current contract negotiations with the union representing more than 8,400 ramp, operations, provisioning and freight agents suggests another option: more outsourcing. Transport Workers Union Local 55 says Southwest is pushing for the right to outsource as much as 30% of its ground-handling at each airport. The union argues that proposal goes against the culture of Southwest, which has established remarkably good employee and union relations over the decades, and the TWU has gone public with its opposition, so it will be interesting to see how this plays out.