Blog Coverage Major Progress for Southwest Airlines as Union Shake Hands on a Tentative Labor Agreement

LONDON, UK / ACCESSWIRE / September 12, 2016 / Active Wall St. blog coverage looks at the headline from Southwest Airlines Co. (NYSE: LUV) as the company announced on September 9, 2016, that it had reached a new provisional labor agreement with the union that represents its flight attendants. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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The Deal

Southwest Airlines has been in negotiation in regards to a labor contract for more than three years with Transport Workers Union Local 556 (TWU Local 556), the union that represents the airline’s Flight Attendants. The TWU Local 556 and Southwest Airlines have reached a tentative agreement. If this agreement is accepted by the union, it would affect nearly 14,500 flight attendants. The exact terms of agreement were not disclosed.

The final approval to the tentative agreement will require at least a month’s time as it goes through the various internal processes of the union. As per the by-laws of TWU Local 556, the tentative agreement needs to be reviewed by the union’s Executive Board before being sent for final approval. The final approval will be done through a ratification vote by the members of the union.

Commenting on the agreement, Sonya Lacore, Vice President Cabin Services of Southwest Airlines said:

“I am grateful for the collaboration of the negotiating teams who worked together to reach an agreement that supports our Flight Attendants and our airline.”

Audrey Stone, President and Lead Negotiator of TWU Local 556 said:

“Our members are the best flight attendants in the industry and provide legendary service to our customers. We deserve a contract that recognizes that dedication and professionalism.”

The background and issues

Southwest Airlines has been bogged by labor issues in spite of increasing profitability and performance. The airline has been trying to contain its labor costs and feels that its wages are one of the best in the industry.

The TWU Local 556 had rejected the earlier labor contract put forth by Southwest Airlines in July 2015, when nearly 87% of its members had rejected the offer. The tentative agreement had covered raises, bonuses as well as a ratification bonus. The union has been negotiating for a labor contract with better terms in the backdrop of deteriorating working conditions at the airline. The union had even planned picketing events at ten airports nationwide in August 2016 to educate the public of the issues faced by them.

On August 3, 2016, the four unions representing 50,000 employees of Southwest Airlines had given a “no confidence” vote against the CEO Gary Kelly and COO Mike Van de Ven for being unsuccessful in fixing the operational failures of the airlines and finalizing the labor contracts. The Southwest Airlines’ unions included The Southwest Airlines Pilots’ Association, Transport Workers Union 556, and Transport Workers Union Local 555 that represents ramp, operations, provisioning and freight agents and Aircraft Mechanics Fraternal Association that represents the technicians.

The issue came to head on July 20, 2016 when a technical snag led to the cancellation of 2,300 flights which led to thousands of passengers and crew members of Southwest Airlines being stranded across various airports.

Settling labor issues step by step

Southwest Airlines has been slowly putting its house in order, especially where its labor contracts are concerned.

On September 1, 2016, the airliner announced that it had reached an “in principle” agreement with Aircraft Mechanics Fraternal Association (AMFA) that represents the Facilities Maintenance Technicians. The contract is awaiting a ratification vote from AMFA members and is for a period of five years and covers work rules, a wage scale, and a ratification bonus.

On August 29, 2016, The Southwest Airlines Pilots’ Association reached an agreement with the airline in principle on a new contract that includes retroactive pay plus raises over the next four years. The contract will be final once the union puts it for a ratification vote. The pilots have worked without a new contract since 2012.

In February 2016, Transport Workers Union Local 555 that represents ground workers like ramp, operations, provisioning and freight agents had signed a new 5-year labour contract with Southwest Airlines.

Stock Performance

Southwest Airlines’ share price finished yesterday’s trading session at $37.34, sliding 3.66%. A total volume of 9.01 million shares exchanged hands, which was higher than the 3 months average volume of 7.59 million shares. The stock has advanced 1.22% in the last one month. The stock is trading at a PE ratio of 9.88 and a dividend yield of 1.07%.

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