Southwest pilots reject new contract

June 3, 2009 3:52:15 PM PDT
Pilots at Southwest Airlines Co. voted down a new contract that would have given them pay raises in the midst of a slump in the airline industry. The vote was close, with less than 51 percent voting against the five-year contract, the union said Wednesday. It marked the first time the pilots' union had rejected a contract at Southwest.

Union president Carl Kuwitzky said despite pay raises, the proposed contract -- which the union board had recommended -- "contained too many other negative aspects to ratify it."

The contract called for pay raises of 2 percent each of the first three years, then raises based on Southwest's profitability in the last two years for Southwest's 5,900 pilots. Some other labor groups at Southwest received annual raises of 3 percent.

"There is no one issue that galvanized the membership," Kuwitzky said in an interview. "I think there were three or four issues."

Kuwitzky said changes in how pilots are scheduled and how overtime are calculated were among the concerns he heard from pilots.

There was also grumbling about Southwest's plans to sell travel to Canada and Mexico on partner airlines, which many pilots consider a threat to their jobs. Some objected to giving Southwest more flexibility in striking so-called code-sharing deals for travel to Canada, Mexico and the Caribbean.

In a statement, Southwest vice president of flight operations Chuck Magill said the company was disappointed in the vote.

"We reached a tentative agreement in good faith, and both sides put a lot of effort into getting to this point," Magill said, adding that Southwest would "re-engage and work toward an agreement that best meets the needs of our company and our outstanding pilots during these challenging economic times."

Wall Street analysts had questioned Southwest management about labor deals that gave pay raises while the airline industry was in a dire slump. Chief Executive Gary Kelly defended the raises while adding that if the airline were in serious financial trouble, he could ask the unions to suspend pay raises.

Last year, airlines were hit with record fuel prices. This year, the recession has undercut demand for air travel. After going 17 years without a quarterly loss, Dallas-based Southwest has lost money the last three quarters. On Wednesday, it reported that traffic in May fell 3.6 percent from a year ago.

The company and the Southwest Airlines Pilots' Association began negotiations in September 2006 and reached a tentative agreement earlier this year.

In the airline industry, labor contracts don't expire but can be changed once their expected term ends. Federal law makes it difficult for airline employees to strike.

The union said pilots would continue to work under terms of the current contract, and its directors would meet next week to plan for renewed bargaining with Southwest.

Southwest has a total work force of 35,000, but it is currently offering incentives for employees to leave.

Shares of Southwest fell 7 cents to close at $6.97 on Wednesday.

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