Southwest CEO says can avoid layoffs through 2021 with employee pay cuts

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(Reuters) – Southwest Airline LUV.N can avoid furloughs and layoffs at least through 2021 if union workers agree to pay cuts, Chief Executive Gary Kelly told employees on Monday.

Last week, Kelly had warned the airline could be forced to follow rivals and lay off thousands of employees due to the coronavirus crisis in the absence of an extension of federal payroll aid, which lawmakers continue to negotiate in Washington.

If the federal relief does come through, the airline would discontinue or reverse the pay-cut efforts, Kelly said.

But without another payroll support package, he said cost savings must be in place for all employee groups by Jan. 1, 2021.

Kelly is reducing his base salary to zero through the end of 2021 and continuing a 20% cut in senior executives’ pay through next year. The airline is also reducing all leadership group salaries by 10% until Jan. 1, 2022, when he said they will return to the current level.

The company is also approaching union representatives for concessions and hoping for quick agreement, he said.

“We simply don’t have time for long, drawn-out, complex negotiations,” Kelly said.

Rivals American Airlines AAL.O and United Airlines UAL.O have already begun furloughing 32,000 employees.

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