Early-retirement offer made to most Southwest workers

3 benefit packages floated after labor leads 10% rise in costs during 1st quarter

May 28, 2004|By BLOOMBERG NEWS

DALLAS — DALLAS- Southwest Airlines Co., the biggest low-fare carrier, said yesterday it is offering voluntary early retirement to most of its 31,522 employees to help reduce costs.

Southwest is the largest carrier at Baltimore-Washington International Airport. It has about 2,200 employees based at BWI.

The program provides three benefit packages based on years of work and is available through June 25, spokeswoman Linda Rutherford said. The offers, to employees who have been with the Dallas-based company at least a year, include mixes of cash, health-care benefits and travel privileges.

Southwest has never laid off workers in its 33-year history. The early-retirement offer was requested by workers, chief executive Jim Parker said in a memo to employees. Southwest, the only major U.S. carrier to remain profitable since the 2001 terrorist attacks deepened a travel slump, had a 10 percent rise in total first-quarter costs, led by labor expenses.

"That's a very, very aggressive" offer because it's being made to people with such low seniority, said Robert Mann, president of R.W. Mann & Co., an airline consulting firm in Port Washington, N.Y. "They are facing a lot of labor cost pressure, especially if they plan to continue to grow rapidly."

If Southwest has a lot of workers with high seniority, the program may allow the airline to replace them with lower-paid employees, he said.

Southwest's last companywide early-retirement offer was in 1988, when 12 people accepted, Rutherford said. Southwest said it has no target number of people in the new program and can't estimate cost savings.

Southwest expects to pay as much as $100 million more this year than last for jet fuel because of higher prices, even though the airline has hedged 80 percent of its 2004 fuel needs at about $24 a barrel. The carrier increased fares this week $1 or $2 each way, depending on the length of the flight.

First-quarter fuel costs rose 11 percent to $230 million. Labor costs increased 14 percent to $589 million and airport expenses such as landing fees also rose 14 percent, to $103 million.

"Our airport costs and fuel costs have been rising," Rutherford said in an interview. "We're in an environment where people are paying less for their airfare. We definitely have been focused on lowering our operating costs."

Southwest shares fell 3 cents to $15.66 yesterday.

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