Southwest Airlines’ Pilots Have Had Enough. What About Shareholders?

Labor negotiations are always complicated, especially when they involve airline pilots.

Pilots keep planes in the air and passengers safe, and airlines know they must handle negotiations carefully and in good faith. Several of the largest U.S. airlines, including Delta, American Airlines, and United Airlines, have recently reached new deals with pilots. There is one glaring holdout, however: Southwest Airlines (NYSE: LUV), where the pilots’ union claims the company’s scheduling failures have brought it to a breaking point.

While the pilots’ unions reached agreements with other major carriers without significant drama, the Southwest negotiation drags on, and with it the potential for a strike. The crux of their disagreement—flight scheduling—should be cause for concern for shareholders and the company’s board. The company’s most critical front-line employees are ringing an alarm bell, and management needs to listen.

Pilot contracts often resemble each other; once one airline reaches a deal with the pilots, that contract becomes the model for the rest. Right now, the latest contracts will increase pilots’ salaries by 35-40% percent. Yet pay is reportedly not the primary sticking point in the Southwest negotiation. Instead, the pilots’ union is looking for improvement from management on how they schedule flights.

The way flights are scheduled impacts how often they run on time, how they are able to be rescheduled in events of storms, and the working days and hours of flight crews. Bad scheduling can lead to fatigue, cancellations, and cascading problems from there.

Following a spate of winter storms at the beginning of the year, the airline was unable to deploy flight crews where they were needed quickly enough. Even as other airlines got planes back in the air and passengers on the way, Southwest floundered. According to the Southwest Airlines Pilot Association, the underlying issues haven’t been adequately resolved since then.

And here’s the thing: This isn’t just a labor issue. Southwest failed during its winter storm meltdown, and its most important frontline employees—pilots and flight attendants—are saying that the root cause of the problem, problems with scheduling, has not been resolved. Not only that, but if they are to be believed, this failure is beginning to significantly and negatively impact their ability to do their jobs well.

The airline delivers value to its customers by getting them to their destinations safely, on-time, and in comfort. If they’re not able to consistently do that, then that is a serious problem that will impact the company’s long-term prospects. In the past year, Delta’s stock is up nearly 35% (NYSE: DAL), while Southwest’s is down almost 11%. Clearly, the market sees these companies very differently. Southwest’s leadership should be laser focused on this issue right now.

Scheduling problems are “the main driver of customer dissatisfaction with delays and canceled flights,” SWAPA President Casey Murray told TheStreet. Murray argued that efficiency at the airline had plummeted “due to mismanagement” and that in 2022 pilots “lost 35,000 days off as they were involuntarily forced to work on off days,” with July 2023 marking “the highest number of fatigue calls in SWA history. The scheduling system MUST be corrected if SWA is to excel. Today SWA is focused on not failing through schedule reductions and preemptive cancellations and as such, can never win when the focus is not failing.”

And it’s not just about pilots; Southwest Airlines flight attendants recently picketed in Denver, primarily because, according to Transport Workers Union President Lyn Montgomery, SWA is “not a great place to work. Flight attendants are feeling abused with extended duty days, massive reschedules, no certainty in their work life.”

Ordinarily, this would come across as saber rattling by a labor leader engaged in fierce negotiations. However, the resolution of negotiations with the other three major airlines makes this look different; it’s a unique issue and sticking point. Moreover, the public saw Southwest’s scheduling struggles firsthand at the beginning of the year. This isn’t an abstract discussion, it’s a real problem that thousands of customers have been forced to deal with.

A Southwest representative did respond to TheStreet, stating that the airline felt “confident that the mediation process will continue driving us even closer to a final agreement that rewards our Pilots and supports our business. We have a 52-year history of taking care of Southwest employees, and we look forward to continuing that legacy…. We feel it’s important to note: Southwest has been in negotiations for a new Pilot contract about one year less than several other carriers that have recently announced agreements.”

Nevertheless, the airline’s management must take this seriously, and its board needs to be asking them some tough questions: What areas are they paying attention to? Do they have the right people running those critical areas? If they do, then why are scheduling problems persisting (if that is the case), rather than getting dealt with proactively? They must look at their business holistically and understand whether problems in one area—scheduling—are damaging other parts of the business.

There can’t be any excuses with something as basic as scheduling your flight crews and pilots, because that directly impacts your ability to serve your customers with dignity and respect. This is about the airline’s customers and how it takes care of them.

Right now, it looks like Southwest has been coasting, but now they don’t want to play ball with the unions. If they’ve got a problem there, then they’ve got to do something about it. If the unions have been able to work out a deal with all the other airlines, then what’s the problem here? Is it—as the airline says—that they just need more time for negotiations? Or are the unions right that there’s a critical problem with scheduling?

If I was on the board, I’d be asking why the stock keeps going down when that’s not true of my competitors. The company’s core employees are saying there’s a serious problem, and management needs to listen.