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Wed, Jul 18, 2007

Southwest Offers 8,700 Workers Buyouts To Trim Labor Costs

"We Don't Have Any Idea Of How Many People Are Interested"

As many as 8,700 employees at Southwest Airlines may soon be without a job... and what's more, that could prove to be a lucrative decision for them.

In hopes of trimming labor costs, the Dallas, TX-based low-cost carrier -- which has a strict, albeit unofficial, "no furloughs" policy -- plans to offer those workers the opportunity to leave their jobs early, and be compensated for that decision. The package includes $25,000, as well as continued health insurance benefits and flight privileges, according to the Dallas Morning News.

Once on the low end of the pay scale relative to other large airlines, the tables turned after 9/11 when Southwest declined to follow other airlines in cutting their pay rates. Employees have continued to receive raises in that time, as well.

That compensation is taking an increasingly bigger chunk out of the airline's bottom line... and given what the competition is offering, it makes little business sense for Southwest to continue paying the higher rates. But cutting pay isn't keeping with the Southwest tradition, either.

Enter, voluntary buyouts.

"The goal is to reduce our labor costs, but in a very Southwest way, which is to provide a really nice package that recognizes the contribution that they've already made to the company, again keeping it on a voluntary basis," Southwest spokeswoman Beth Hardin said. "If this is not the time for them to leave Southwest, then this is still their home here."

Southwest has never furloughed employees since it began flying in 1971. The airline has offered buyouts once before, however, in 2004 -- and about 1,000 workers accepted them, according to Hardin.

Offers went out this week to many of the higher-paid support workers at the airline -- including flight attendants, customer service staff, reservations, and ramp workers.

No one is being forced or pressured to leave, Hardin stressed, and the airline doesn't have a specific quota in mind.

"It is voluntary," she said. "We don't have any idea of how many people are interested."

The plan is to replace those workers who accept the buyout plan, with new, cheaper hires -- which airline industry consultant John Pincavage says is a sound strategy.

"I think they're doing what they have to do to continue to maintain a level of profitability, margins and so forth," Pincavage said. "If you don't work at it every day, it'll jump up behind you and eat you, the big cost monster."

FMI: www.southwest.com

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