By Rajesh Kumar Singh
CHICAGO (Reuters) - Southwest Airlines (NYSE:LUV) plans to offer its pilots reduced hours and, in effect, monthly pay, two people familiar with the matter said, as it grapples with higher costs and overstaffing due to delays in aircraft deliveries from Boeing (NYSE:BA).
The Dallas-based airline, which operates an all-Boeing fleet, has been reeling from the U.S. planemaker's ongoing safety crisis. Last week it warned of a hit to earnings as it expected to receive just 20 Boeing aircraft this year, less than one-fourth of its original plans.
Southwest has called the delays "significant challenges" for this year and next as they have forced it to moderate its growth plans.
Reduced hours for pilots will help lower Southwest's salary bill without needing to resort to furloughs, the sources said. It is also intended to ensure Southwest's pilots meet the U.S. Federal Aviation Administration's (FAA) requirements to stay in the cockpit, allowing the company flexibility to ramp back up operations when required, they added.
The plan is likely to take effect around September and is expected to be offered to hundreds of pilots, one of the sources said.
Boeing's crisis - sparked by a January mid-air cabin panel blowout on an Alaska Air (NYSE:ALK) - continues to ripple through the industry. Airlines have been forced to adjust fleet plans, cut capacity and manage excess staffing.
A Southwest spokesperson said the company has yet to reach an agreement with the Southwest Airlines Pilots Association (SWAPA) that represents its pilots, declining to share more details.
Casey Murray, SWAPA's head, said the pilot union has had preliminary talks with the company concerning Boeing's deliveries. While the airline has not officially made a decision with respect to overstaffing, SWAPA expects to have those discussions very soon, he said.
Southwest has 12,000 pilots who average around 100 hours a month, according to union data. A new junior pilot at the carrier is currently paid about $116 an hour, while a captain at the top of the pay scale makes about $317 an hour.
Southwest plans to cut costs by ending operations at four airports in August and reduce footprints in markets like Chicago and Atlanta.
The airline has also stopped all hiring except for a limited number of critical positions and expects to end the year with about 2,000 fewer employees than in 2023. It expects headcount to be down next year as well due to further reductions in total seat capacity.
Southwest has already offered voluntary unpaid time-off to staff in ground operations and call center, and flight attendants to reduce labor costs.