Markets
LUV

Southwest CEO Urges Lawmakers to Extend Airline Payroll Support

Southwest Airlines (NYSE: LUV) CEO Gary Kelly on Friday backed a union-led effort to extend government support for the airline industry as a way to avoid layoffs.

As part of the CARES Act economic stimulus plan enacted earlier this year, U.S. airlines received $25 billion in financial support to continue to pay employees even as travel demand plummeted. The airlines in return for the funds were prohibited from doing layoffs or furloughs through Sept. 30.

The funds are set to run out next month, and airlines have warned that deep cuts are likely as the industry braces for an extended downturn.

A masked traveler walks through the airport.

Image source: Getty Images.

Kelly in a video message to employees posted Friday said he supported efforts to renew the payroll support for another six months as part of a second round of stimulus currently being negotiated in Congress. Kelly said he would support a so-called "lift and shift" proposal that would keep the funding, and the layoff restrictions, in place.

Other airlines, including United Airlines Holdings (NASDAQ: UAL) and American Airlines Group (NASDAQ: AAL), have lent support for the effort, but Kelly's statement is perhaps the most direct public endorsement of the effort by an airline CEO.

Southwest has never done layoffs in its nearly 50-year history, and the company is hoping to avoid furloughs this Fall after more than 25% of Southwest employees volunteered to take buyouts or extended leave of absences to help cut costs.

Airlines were forced to provide the U.S. Treasury with warrants in exchange for the earlier round of payroll support. While the industry is supportive of continued assistance, it is less clear they would be willing to trade more stock or collateral for that continued help. Especially since travel demand is expected to remain weak well beyond the six-month extension period being discussed, and layoffs are a viable alternative.

Kelly said he is also supportive of legislative efforts to help encourage travel, including liability protections for businesses, an extension of the ticket tax holiday, and grants for airports.

10 stocks we like better than Southwest Airlines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Southwest Airlines wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 2, 2020

 

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.

In This Story

LUV UAL AAL

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More