Southwest Airlines Co., which has never laid off an employee despite the industry's tough times, offered buyouts yesterday to more than a quarter of its work force, a move that officials expect will help the carrier remain profitable as it grapples with its two largest costs: labor and fuel.
The airline employs more than 33,200, including about 2,600 in the Baltimore region. It's targeting those with more than a decade of service, or 8,700 workers, though workers and observers expect that Southwest will replace each person who leaves with someone earning less money.
Southwest has offered buyouts once before in its 36-year history -- in 2004. Known for its fun and productive working culture, Southwest last year reported that it received 85 times as many resumes as it had openings.
Most other major carriers have cut staff and salaries since the Sept. 11 terrorist attacks devastated the industry. The Air Transport Association, the domestic carriers' trade group, reported that employment industrywide has dropped 27 percent since the 2001 attacks, to about 397,600.
"Labor is such a large part of our costs, we wanted to offer employees a voluntary program, knowing they could choose to accept or decline," said Southwest spokeswoman Whitney Eichinger. "It will be attractive to some and not others."
She said there was no target number of workers and couldn't immediately provide a cost savings estimate. She also could not say what would happen if not enough workers accept the offer.
The buyout offers, which were mailed yesterday, would give each worker $25,000 in cash and some continued health and travel benefits based on age and years of service. The offer will go to union workers and supervisors in reservations, baggage and customer service as well as flight attendants, who make up a majority of the work force. It does not include pilots, mechanics or administrative office workers.
Michael Massoni, a first vice president of the Transport Workers Union local that represents the flight attendants, said the move was not "giving anyone heartburn."
He said, "It is voluntary and we fully understand what Southwest wants to do, which is pare down costs by tempting higher-paid workers to take an early retirement with a cash bonus."
The union official, who is himself a Southwest flight attendant based in Phoenix, said the carrier has about 9,000 flight attendants. He estimates about 2,000 would be eligible for the buyout.
In Baltimore, Southwest's fourth-largest hub, he said there are about 1,800 flight attendants, a majority of the airline's work force in the region.
The buyout offers did not surprise Daniel M. Kasper, managing director of LECG, a Cambridge, Mass., consulting firm that tracks the airline business.
He said Southwest leaders were smart to find ways to cut costs at a time when the airline's heralded fuel hedges are expiring. The contracts, through which Southwest bought fuel in advance for fixed prices, allowed the carrier to save billions in recent years as prices skyrocketed.
He noted that Southwest's labor costs rose as other major carriers were cutting workers and slashing their salaries while the airlines reorganized in bankruptcy court.
Southwest salaries are now on a par or better than most other major carriers -- a reason Massoni, the union official, said the buyout might not appeal to many workers.
Southwest flight attendants earn from $23 to $58 an hour.
"As successful as Southwest has been, the market has changed a lot around it," said Kasper. "And some adjustments are pretty clearly called for."
Kasper said the airline is likely to hire new workers to replace many of those who take buyouts, but at lower wages.
Southwest said last month that it would slow its growth in capacity -- the number of seats available -- by nearly half to 6 percent.
Gary C. Kelly, Southwest's chief executive officer, also has said that the carrier wants to find ways other than fare increases to boost revenue by $1 billion a year over the next few years. That could come from assigning seats, offering entertainment services or selling other travel-related services on its Web site.
The carrier also said it would slash many of its transcontinental nonstop flights because of poor profitability.
Southwest is scheduled to announce its second-quarter earnings today
meredith.cohn@baltsun.com