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Report: 25% of Southwest Airlines Accept Buyouts, Extended Leave

More than 25% of Southwest Airlines (NYSE: LUV) employees reportedly have volunteered to take buyouts or extended leaves of absence boosting the airline's effort to avoid resorting to furloughs for the first time in its nearly 50 year history.

Southwest and other airlines have been hit hard by the COVID-19 pandemic, which has cut into demand for air travel. The industry is prohibited from doing layoffs through Sept. 30 as a condition for receiving federal bailout funds, but with travel demand likely to be limited through 2021 at a minimum the airlines are looking for ways to cut costs.

An airplane landing on a runway.

Image source: Getty Images.

Southwest famously was able to avoid layoffs after the Sept. 11 attacks, but CEO Gary Kelly said earlier this year that the airline might need to become "dramatically smaller" in the months to come, which could require involuntary separations.

In a Monday audio message to employees first reported by the Dallas Morning News, Kelly said that 16,895 employees, or about 28% of the airline's total workforce, had signed up for either buyouts or extended leave. About 4,400 employees took voluntary separation packages, and 12,500 signed up for either six, 12, or 18-month leave packages.

"I'm incredibly grateful to those of you who answered the call," Kelly said, according to the report.

Southwest is better-positioned than most to survive the crisis, with nearly two years' worth of cash on hand. But the company's aggressive push is a reminder to investors that even the best-run airlines need to take aggressive steps to stem losses given the grim forecast for air travel demand in the coming years.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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