Thanks to adequate uptake of its voluntary separation and extended leave programmes, Southwest Airlines (WN, Dallas Love Field) will not pursue any involuntary furloughs and layoffs at least through the end of 2020.
"Based on the strong take rates from these voluntary programs, currently, we do not intend to pursue furloughs and layoffs, or pay and benefits cuts, through year-end; however, we will continue to plan for multiple weak scenarios and maintain our preparedness," Chief Executive Gary Kelly confirmed during the carrier's quarterly earnings call.
The airline disclosed that around 16,900 staff members volunteered to participate in voluntary programmes announced during the quarter, including 4,400 who voluntarily agreed to leave Southwest and 12,500 who agreed to take 6-, 12-, or 18-month unpaid leaves. The total number of participants in these voluntary programmes amounts to 27% of the LCC's workforce.
The number includes 2,300 pilots, amounting to a quarter of all pilots working for Southwest.
The airline expects that these voluntary programmes would result in a USD400 million savings in the fourth quarter of 2020.
While Southwest Airlines, as a recipient of the federal Payroll Support Programme, is barred from laying staff off through the end of September, it could theoretically pursue involuntary furloughs and layoffs as of October 1.
The airline said that while it lost USD1.5 billion during the second quarter, it had USD15.5 billion in liquidity at the end of June 2020, including USD10 billion available in unencumbered aircraft. Its cash burn was reduced to around USD16 million per day, down from around USD30 million at the beginning of the pandemic.
During the earnings call, Chief Operating Officer Mike Van de Ven underlined that the airline remained committed to the B737 MAX and expects the type's return to service in late December 2020.
"Given the history of delays, it certainly could slide into the first quarter," Van de Ven said.
Executive Vice-President and Chief Financial Officer Tammy Romo added that while the airline has not recently amended its contractual obligations towards Boeing, it looks likely that some deliveries could be deferred due to a mix of weak demand as well as a delayed return of the B737 MAX.
"At some point, we'll need to adjust 2020 and 2021 deliveries down and shift delivery slots by a year, but we have not cancelled any of our orders or options with Boeing over the life of the agreement," Romo said. Van de Ven added that the 48 aircraft currently scheduled for delivery by the end of 2021 felt "like a maximum" and that the airline would "probably have a need for something less than that".
