Airline Pilot Central Forums - Union hints of acquisition

March 16, 2024

Risk Mitigation
Casey Murray, President

Last week, Southwest Airlines made the announcement that it was ceasing additional hiring through the end of 2024. While SWAPA knew there was the growing likelihood of a hiring suspension, there are many unanswered questions around the decision.

First, why are we here? Our single fleet strategy, while adding simplicity and cost advantages, injects a level of risk into the enterprise. We saw the depressurizations among the -300s in 2016 and the MAX groundings in 2019, while the more recent delays with the MAX-7 have many questioning if it will ever be certified. With Boeing facing unprecedented scrutiny, this places a single point of failure in Southwest’s future.

As Southwest has had to cope with a larger gauge aircraft (the MAX-8 at 175 seats) due to Boeing’s inability to deliver the MAX-7 (150 seats), we have reached a business inflection point. We watched our ASMs grow and load factors decline due to a supply/demand imbalance caused by flying too large an airplane in certain markets. We may have now reached the point where we are no longer able to place the right sized aircraft into the correct network segment. Consider that Southwest’s load factor was 78.2% in the most recent quarter versus 83.5% in the same quarter of 2018, which marks a 5.3% decline.

Coincidentally, SWA’s seats per trip (gauge) were up 5.3% when comparing the same time periods, meaning that these additional seats went unfilled with revenue paying passengers. This is the risk Southwest continues to accept as it relies upon a single-source aircraft manufacturer.

Our airline is benefiting from deeply discounted prices for aircraft, but when management can't place into service the smaller, fuel-efficient aircraft needed, business decisions must be reevaluated. Pilot staffing is a part of these continual assessments, and evolving enterprise realities drove SWAPA's anticipation of a hiring suspension.

Identifying risk and planning for it is SWAPA's job in protecting our Pilots. Fearing that Southwest finds itself at a competitive disadvantage and assessing the marketplace as a whole (Alaska/Hawaiian, JetBlue/Spirit anti-trust failure, Delta's superior revenue generation), will the Company feel the need to make a change? And if so, what effect will that decision have on our Pilot group?

Last month, SWAPA made the decision to retain several law firms if Southwest attempts to acquire another carrier. One of those firms would be an experienced labor firm tasked with protecting SWAPA Pilots in a seniority list integration. The second — and possibly third — firm would handle the business and equity side of the transaction to ensure our Pilots were invested in the capital of the new entity. In 2010, then-SWAPA President Carl Kuwitsky and then-CEO Gary Kelly failed to follow Delta/Northwest's lead in allowing the Pilots to be equity partners in the transaction when Southwest acquired AirTran. SWAPA will not make that mistake again.

To be clear, neither I, nor anyone at SWAPA, have any knowledge of an acquisition or merger in Southwest Airlines' future. In fact, I hope a merger and/or acquisition never comes to pass, but as I've said numerous times, hope is not a strategy. Strategic agility is one of the best ways to mitigate risk.

SWAPA will prepare for whatever future awaits and execute what is necessary to assure our membership that they are the best positioned Pilots in the industry.

Case