Southwest Airlines Shares Rise as Pilots Approve New Contract

Southwest Airlines Reveals New Destinations For Dallas Travelers
A Southwest Airlines Co. Boeing 737-3H4 plane moves along a runway at Dallas Love Field Airport in Dallas, Texas, U.S., on Monday, Feb. 3, 2014. Southwest Airlines Co., the largest domestic carrier, will begin flying to 15 new destinations from Dallas Love Field when flight restrictions at the airport closest to downtown end in October. Photographer Ben Torres/Bloomberg via Getty Images
Photograph by Ben Torres/Bloomberg via Getty Images/File

Pilots at Southwest Airlines voted to ratify a new contract that hikes wages and alters retirement benefits, their union said on Monday, following more than four years of talks.

The approval marks a step toward better labor relations at the U.S. budget airline after recent picketing by workers and calls by union leaders for two executives to resign.

Shares were up 3% at the market’s close.

The new contract raises pay by 15% upon ratification, followed by increases of 3% annually through 2020, the Southwest Airlines Pilots’ Association said in a news release.

The deal, reached with the help of U.S. mediators, moves pilots from a company-matching pension plan to one where they are not required to contribute to receive benefits, the union said. It also protects pilots’ work in case Southwest chooses to market flights on non-U.S. airlines.

More than 84% of voting pilots approved the deal, with turnout at 96%, the union said.

Southwest (LUV) is “starting to put behind some of the rancor that has punctuated the place for the past couple years,” industry consultant Robert Mann said.

A July computer outage that forced Southwest to cancel more than 2,000 flights added to workers’ discontent. Weeks afterward, leaders from four unions submitted a vote of “no confidence” for Southwest’s chief executive officer and chief operating officer.

“Even the most ardent labor supporters start to ask questions when you can’t run a clean operation,” said Mann. “It is absolutely no fun apologizing to people all day long” for flight cancellations.

A week ago, flight attendants at Southwest voted to ratify a new contract.


The Dallas-based airline has said it expects new labor deals will raise its unit costs, excluding fuel and other items, by about 3.5% in the fourth quarter from a year ago.

Under the new contract, the pilots’ union said a captain in his or her first year with Southwest will now make $221.01 per hour, up from $192.18.

Southwest recently raised U.S. domestic fares by $5—an effort welcomed by JPMorgan analyst Jamie Baker, who said rising prices were needed to offset a $600 million to $800 million increase in labor costs.

The company also hopes new international flights will boost revenue.

The contract “delivers the operational flexibility needed to grow our network and ensures that Southwest will remain well-positioned for long-term success in our intensely-competitive industry,” said Alan Kasher, Southwest’s vice president of flight operations, in a news release.

The contract will be up for amendment again in November 2020.

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