Nearly 17,000 Southwest employees sign up for buyouts, voluntary leave as furlough threat looms

Key Points
  • Nearly 17,000 Southwest employees, or about 28% of the workforce, signed up for leaves of absence or early retirement.
  • Thousands of employees at other carriers have also signed up for unpaid or partially paid leaves or buyouts.
  • More than 2,200 Delta pilots have volunteered to retire early.
A Southwest Airlines jet leaves Midway Airport on in Chicago, Illinois.
Scott Olson | Getty Images

More airline employees are signing up for buyouts, leaves of absence and early retirements as the threat of furloughs looms this summer amid the Covid-19 crisis.

Close to 17,000 employees or about 28% of Southwest Airlines' workforce has signed up for partially paid extended leaves of absence or outright buyouts, the company's CEO, Gary Kelly, told employees Monday. Nearly 4,400 put their hands up for buyouts while close to 12,500 expressed interest in extended time off, Kelly said in a staff memo seen by CNBC.

Airline executives have urged employees to take unpaid or partially paid time off to cut costs. The terms of $25 billion in federal aid prohibit carriers from furloughing or laying off workers until Oct. 1, though unions are pushing for billions more in aid to protect their jobs through the end of March 2021. The approaching expiration of the current round of aid means airline employees have to weigh potential furloughs against buyouts that include severance and an extension of health-care benefits.

Companies are offering a host of buyout and early retirement programs as well as unpaid or partially paid temporary time off that provide health-care benefits but reduce carriers' labor expense. The results of the programs comes as demand for air travel eases during the all-important summer travel season.

"Overall, I'm very pleased with the response to these programs," Kelly said in the memo, which was reported earlier by the Dallas Morning News. "I'm incredibly grateful to those of you who answered the call. I know there are stories behind every one of those 16,895 decisions — from your incredible history at Southwest Airlines, to stories of what's ahead in your next phase."

Southwest, which reports quarterly results before the market opens on Thursday, didn't immediately comment.

At Delta Air Lines, the deadlines for pilots to apply for early retirement packages closed Sunday and 2,235 of them signed up, according to their union.

"The voluntary early-out program participation exceeded our expectations, which is positive," said Air Line Pilots Association spokesman and Delta pilot Christopher Riggins.

Cowen's Helane Becker on the state of the airline industry
Cowen's Helane Becker on the state of the airline industry

Delta last month said close to 2,600 pilots would be warned about potential furloughs when the terms of federal aid expire this fall. The carrier said more than half of its more than 14,000 pilots would be eligible. When settling on the number of jobs at risk, Delta had already factored in routine retirements as pilots approach the federally mandated retirement age of 65.

"This is meaningful progress as we look to mitigate furloughs and our teams are hard at work to determine next steps and evaluate how the pilot early retirement may affect Delta's overall pilot staffing outlook," the airline said in a statement.

Delta's early retirement program provides pilots partial pay for up to three years and extended health insurance coverage.

Delta last week asked pilots to reduce their minimum hours by 15%, a plan that the airline says would avoid involuntary furloughs for a year, CNBC first reported.

Southwest shares lost 3.4% and Delta's fell 3.1% on Monday. United shed 4.7% and American slipped 3.7%, while the broader market gained.