The expired $25 billion stimulus package is causing airlines to furlough workers and cut flights. FOX Business’ Kristina Partsinevelos with more.
In a video to employees Monday, Southwest CEO Gary Kelly announced that the airline will need to “sacrifice more” by undergoing pay cuts in an effort to avoid layoffs and furloughs through 2021 amid the coronavirus pandemic’s ongoing impact on travel demand.
The announcement comes as the airline industry has been pleading for an extension of the payroll support program allotted under the Coronavirus Aid, Relief, and Economic Security (CARES) Act which Congress passed in March following the expiration of the $25 billion bailout on Oct.1.
Kelly noted that since the act’s Payroll Support Program (PSP) has expired, that Southwest “simply cannot afford to continue with the conditions required to maintain full pay and employment,” Kelly said.
Applauding his employees, stating they “all have performed magnificently” and called them “our heroes” but the CEO of 12 years said, “now its time for us to do what must be done to save Southwest Airlines.”
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While Kelly said he remains grateful for the six months of previous payroll support, he argued that it “just didn’t go far enough or long enough,” with domestic air travel dropping to “1970s levels” during the pandemic, down 70% from a year ago.
“Cost and spending have been cut dramatically at Southwest, but not nearly enough to offset a 70% revenue loss,” Kelly noted. “Salaries, wages and benefits are far and away our largest cost item, and we would have to wipe out a large swath of salaries, wages and benefits to match the low traffic levels to have any hope of just breaking even.”
He also warned that the airline’s quarterly losses could