Southwest Airlines, a Symbol of Freedom

Southwest Airlines announced this morning that it’s living up to that old motto, offering nearly every single employee what CEO Gary Kelly calls an “early out” in the wake of a first-quarter net loss, the Dallas-based carrier’s third straight decline. Southwest today announced a first-quarter ’09 net loss of $91 million, compared to net income of $34 million last year, prompting the buyout offers, a hiring freeze and wage freezes for the airline’s officers and senior management, which were also announced in this morning’s press release.

Among the reasons for the losses: “a rapid weakening in
passenger demand,” says Kelly, and a drop in the value of its fuel-hedging program. And he expects it to get worse before it gets better, just as Love Field’s about(ish) to undergo a $500-million expansion over which Southwest will have substantial control. Says Kelly:

“We have
significantly reduced planned capital spending by approximately $1.4 billion
for 2009 and 2010 combined by deferring aircraft deliveries, accelerating
aircraft retirements, and suspending plans to grow our capacity. As announced
to our Employees earlier this morning, we intend to reduce and align headcount
to current capacity needs by offering a systemwide voluntary early-out
program. Virtually all Employees are eligible under the early-out program and
must make their election to participate by June 19, 2009. We also have a
hiring freeze in place and have frozen pay for our officers and senior
management. While our balance sheet is strong, we believe these actions, along
with our previous decision to suspend growth plans, and our ongoing efforts to
bolster our cash reserves, will enable us to weather the current financial
storm and remain strong.”