Southwest Airlines Announces Layoffs. How it Will Impact Nevada Residents.
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You or someone you know is probably loyal to Southwest Airlines. The Dallas-based airline is known for its great prices and customer services. Southwest has been profitable every year since 1971, the year it began operating. Unfortunately, 50 years of success hasn’t made Southwest Airlines immune to the devastating financial impact of the coronavirus pandemic.
The pandemic has sent shockwaves through many industries, especially those based on travel and hospitality. Travel is actively discouraged by state governors, and international travel has slowed to a near halt. Unsurprisingly, airlines have been struggling to stay in business, and have had to lay off thousands of employees. The airline industry had 460,000 workers in March 2020, right before the onset of the pandemic. That number has decreased to 370,000 in December 2020. On December 2, 2020, Southwest sent layoff warnings to 6,800 of its employees.
Southwest has spent about $1 billion in what is described as “overstaffing” during the pandemic since travel rates have decreased so dramatically. The numbers of flight attendants, cargo agents, pilots, and customer service agents that Southwest Airlines has on payroll is simply too high with how few people are flying right now. The airline is also negotiating pay cuts as a solution to this issue, but has issued the warning letters in compliance with the Worker Adjustment and Retraining Notification Act.
Southwest Airlines has approximately 58,000 employees, so these letters have been sent to more than 10% of its workforce. The other option is cutting all employees’ salaries by 10% for one year. While managers will have authority to make more nuanced decisions, this will result in approximately 2,500 ramp and cargo agents, 1,500 flight attendants, 1,200 pilots, and 1,200 customer service agents being laid off. These layoffs will take place on either March 15, 2021, or April 1, 2021, depending on the outcomes of negotiations with various unions. The unions clearly don’t want to accept layoffs or pay cuts, but also want to make sure as few of their members are affected as possible.
How will this Impact Southwest Employees in Nevada?
Southwest management will have some autonomy in deciding which employees to lay off. More than 5,000 Southwest flight attendants have taken extended leaves of absence, which will save the company $1.1 billion in 2021. Still, the Transportation Workers Union of America has confirmed that Las Vegas flight attendants are among those who have received layoff warning letters. However, more than 3,700 Southwest flight attendants have indicated that they are willing to participate in voluntary leave programs that could prevent layoffs. Many Southwest employees feel that some employees leaving entirely is better for everyone than cutting everyone’s pay.
As travel stays low in Nevada, that could mean more of these layoffs are concentrated here. Major entities on the Las Vegas strip have already acknowledged that operating on weekdays is unprofitable. Most major conventions have been canceled due to gathering restrictions. If Southwest cuts employees in locations that are overstaffed due to former high travel rates that have plummeted, many of the 6,800 potential layoffs could be here. This would only contribute to Nevada’s relatively high unemployment rate.
Could this Mean Bankruptcy for Southwest Airlines?
While Southwest is having an uncharacteristically unprofitable year, it is probably one of the least likely airlines to declare bankruptcy as a result of the pandemic. It expects to be the first major airline to return to profitability. Southwest still reportedly has $15 billion in the bank. Southwest has indicated that it will keep its entire staff onboard if there is another government stimulus package similar to the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was passed March 27, 2020. The CARES Act included a $50 billion stimulus package for the airline industry to help companies avoid laying off staff. Politicians have been locked in debates for weeks deciding what type of package to use to help Americans next. Either way, Southwest Airlines is unlikely to declare bankruptcy due to the pandemic at this point in time.
How this Interacts with 25% Casino Capacity to Impact Nevada’s Unemployment Rate.
Nevada governor Steve Sisolak initiated a 3 week capacity limit for casinos at the end of November 2020. Bars and restaurants inside these casinos have the same capacity limitations. Previously, these establishments were allowed to operate at 50% capacity. Conventions, a large draw for the Las Vegas hotel industry, have been reduced from 250 people to at most 50 people. This can also create obstacles for Las Vegas shows, which have just begun to reopen. Cirque du Soleil, an innovator in Las Vegas entertainment, was forced to file bankruptcy early in the pandemic due to widespread show cancellations, meaning widespread ticket refunds.
The 25% capacity on casinos is expected to have more impact on weekends than on weekdays. Many hotels have already decided to only operate Thursday through Monday, since travel has decreased so much. Park MGM, Mirage, and Mandalay Bay have already initiated weekday closures, and therefore won’t experience any weekday effect at all. Some hotels are hopeful for holiday visitors, and intend to implement schedules closer to normal during December.
As of November 20, 2020, the unemployment rate in Nevada is 12.0%. The unemployment rate for the United States in general is currently 6.7%. Nevada still has experienced a massive improvement from the peak unemployment rate of 33%, but is still struggling compared to the rest of the country.
Facing Financial Problems in Las Vegas? Contact our Nevada Debt Relief Team.
If you are one of the many Nevada residents struggling financially due to the coronavirus pandemic, know that you have options. When your debts become too much for you to manage on your own, Chapter 7 or Chapter 13 bankruptcy may be available to you as a means of addressing your debt. To learn more about how each chapter of bankruptcy could benefit you, if you qualify, and the steps you need to take to have a smooth case, call to schedule your free consultation today.
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