Southwest Airlines Reaches Tentative Agreement With Transport Workers Union

Vivian Medithi is a freelance writer and critic with bylines at Guardian US, LA Review of Books and No Bells, among others. He previously covered the stock market as an Analyst Editor at InvestorPlace.

Southwest Airlines Co. (LUV) reached a tentative agreement with Transport Workers Union Local 555, but another labor crisis may be waiting in the wings.

Tuesday, the company announced the agreement with the union that covers more than 17,000 of its ramp, operations, provisioning, and cargo employees. LUV stock was down in after-market trading Tuesday but is 0.4% lower than the previous close Wednesday afternoon.

Key Takeaways

• The tentative agreement between Southwest Airlines and the Transport Workers Union covers more than 17,000 ramp, operations, provisioning, and cargo agents.
• Key wins for the union include "industry-leading wages," as well as better job protections and improvements in health and retirement benefits.
• Southwest continues to negotiate with its pilot union, which is taking steps toward a possible strike.

The new contract includes "industry-leading wages" of $36.72 per hour, as well as "caps on insurance premiums, improvements in retirement, job protections, and better staffing," the company said. Parental leave and premium pay days were also among the wins highlighted by the union. Union members still have to vote to ratify the contract.

Tuesday's news follows the July 27 ratification of a collective bargaining agreement between Southwest and the Aircraft Mechanics Fraternal Association (AMFA), which covers the airline's 2,870 mechanics and other related employees.

However, Southwest has yet to reach a tentative agreement with the Southwest Airlines Pilots Association, which asked federal regulators to be released from mediation last month. Given that union pilots already voted to authorize a strike, there's a possibility the U.S.'s third-largest domestic airline in terms of flights could be grounded indefinitely.

That's bad news for Chief Executive Officer Bob Jordan, who faced customers' ire after thousands of flights were canceled during the 2022 end-of-year holiday season. Those nearly 17,000 cancellations and the fallout cost the Dallas-based airline as much as $825 million.

Southwest Airlines announced its second-quarter earnings on July 27. While operating revenue hit a record $7 billion, rising costs due to inflation and reduced breakage—revenue gained by companies through unredeemed gift cards or other prepaid services that are never claimed—gave investors pause, sending LUV shares tumbling.