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Southwest Employees to Receive Record $228 Million Profit-Sharing Payout in 2014

Apr 14, 2014 2:00 pm

Skift Take

The record high profit sharing is a sign that Southwest’s low-fare business model is working, but comes at a time when the carrier and labor unions are at head over compensation and staffing restructuring suggesting the airline is looking for ways to make more while paying less for personnel.

— Samantha Shankman

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Jeffrey S.  / Flickr

Southwest Airlines ground crew at PHX in Phoenix prepare to load the bags. Jeffrey S. / Flickr


Southwest Airlines Co.’s profit sharing will jump 88 percent to a record $228 million this year as the largest low-fare carrier, negotiating new contracts with all of its major unions, shows signs of labor strain.

The payout, which employees will receive in September, represents about 6.3 percent of each worker’s eligible compensation and is up from $121 million last year, the Dallas- based carrier said today. It brings Southwest’s annual profit sharing over the last four decades to $2.5 billion.

The record payout is a boon to employees at a time when the airline has faced a legal challenge from airport workers in Chicago, picketing over possible outsourcing and labor leaders upset with a negotiations website. In contract talks, Southwest wants greater flexibility to use part-time workers in some markets and to pay performance bonuses instead of fixed-scale increases, Chief Operating Officer Mike Van de Ven said in a recent interview.

“Those are the kind of things we’re trying to negotiate, where we can get the tools we need to keep our company successful, protect our low-fare brand and share the rewards with our employees,” he said. “We’re trying to give our employees a secure future with a lot of upside.”

Southwest rose 0.6 percent to $22.88 at 11:40 a.m. in New York. The shares have advanced 21 percent this year through April 11.

Southwest’s labor costs lead the industry after bankruptcies allowed larger competitors to restructure contracts and trim compensation. More than 80 percent of the airline’s workers are represented by unions, and talks are under way with flight attendants, pilots, mechanics, ramp workers and others.

“We are making progress every time we meet, but some of these issues are just difficult,” Van de Ven said.

Negotiation Website

In February, leaders of 12 union groups protested to Chief Executive Officer Gary Kelly after a website created by Southwest posted negotiation updates and details of existing contracts, including salary and other contract data. Southwest responded by taking down the public side of the website.

“We’ve made adjustments to the content based on initial feedback from the unions,” Brandy King, a Southwest spokeswoman, said at the time.

In January, a judge rejected Transport Workers Union Local 555’s request to bar Southwest from requiring workers to provide proof of illness when they missed work. The airline asked for the documentation after a large number of sick calls among baggage handlers and other ramp workers left the company short- handed during a winter storm in January.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net James Callan, John Lear.

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