Southwest Pilots' Huge New Deal Will Force Maverick Airline To Operate Conventionally

Southwest Airlines is all grown up now (and that’s not a compliment).

Oh sure, it still doesn’t offer first class seating, or even assigned seats. There still are no meals served – and likely never will be. And a bit of Southwest’s old playful corporate style still leaks out into public view when flight attendants clown around during the otherwise boring pre-flight safety spiel, or when one of its sly TV commercials gets loaded up with inside jokes, cool cultural touchpoints and subtle put downs of its competitors.

But make no mistake, Southwest reached full maturity on Monday. After four years of frustrating and unusual-for-it ugly labor negotiations, it gave in to labor’s demands and agreed to boost its pilots pay by nearly 30 percent over seven years (back-dated to 2013). Assuming the deal is approved by the Southwest Airlines Pilot Association’s board and ratified by the company’s 8,000-puse pilots Southwest will never be the same (and it’s hard to imagine this deal failing because it’s so much more rich than the deal the rank-and-file rejected last year that would have given them only 17 percent more money).

Southwest Airlines Pilots’ Association members picket outside their airline’s annual shareholders meeting in Chicago earlier this year. Stuck in four years of fruitless contract talks, SWAPA sued Southwest in April trying to prevent it from acquiring the 200-seat Boeing 737-MAX, a new plane central to the airline’s need to increase revenue to cover rising costs. The union asserts that its contract with the carrier does not allow Southwest to introduce that new aircraft without negotiating new pay rates for flying a plane that is 20 percent bigger than the airline’s largest plane today. (Daniel Acker/Bloomberg)

 

What’s more, the new pilots’ deal now is certain to be followed by similarly expensive new deals with its mechanics and flight attendants. As a result of those the much higher costs the long-time king of the low cost carriers will be irrevocably changed in three ways:

• Southwest’s labor costs will be very close to being the highest in the U.S. airline industry. That turns the carrier’s original low cost operating formula on its ear
• Southwest will have to operate more in big air travel markets and compete more aggressively than ever for travelers willing to pay above average fare prices. That’s quite different from Southwest’s historical marketing approach, which has been mostly aimed at price-sensitive leisure travelers and at entrepreneurs and small and mid-size business people trying to keep their travel expenses to a minimum
• Southwest will be compelled to abandon its strict go-it-alone operating model and to begin cooperating with foreign and even certain U.S. airlines in order to generate the additional revenue it’ll need to cover its skyrocketing labor costs.

In other words, Southwest is on course to become just another big U.S. airline. It’s historical distinctives  – low fares, extreme operating efficiency, high esprit de corps and an irreverent and funny style – will, over time,  fade and become secondary, or even tertiary marketing items instead of  the main selling points.

Under the tentative new contract between SWAPA and Southwest, the carrier’s average pilot’s pay will soar from an already eye-popping $230,000 a year to almost $300,000 a year by 2020. The most senior pilots and those who aggressively seek additional flying opportunities in order to maximize their earnings can bring in much more than that.  In light of the big new pay hike it’s hard to see how the carrier can avoid granting its other unionized workers similarly gracious contracts.  And in short order little ol’ low cost Southwest will be vying with high cost Delta for the title of “highest paying airline.”

To cover those much higher costs, Southwest will have to begin pursuing “big” dollar travelers like never before. The Dallas-based carrier built its business model around selling tickets on short haul flights to grandmas and college back packers, and to penny-pinching day-tripping business people who did not have the huge travel budgets to fund their business trips.  Yet it quietly has been the case for 15 or 20 years that Southwest is much more focused on  big city travelers in places like Chicago, Los Angeles, and Dallas than on those in smaller cities like Corpus Christi and Albuquerque that it featured in its early  years. But in the years ahead Southwest will have to become much more focused on milking every dollar possible out of big city markets. It no longer will be able to maintain the pretense of still being a low fare carrier. It may not be a high fare carrier because of its lack of first class seating, but it’s already possible to find lower priced seats on competing carriers than on Southwest. And in the future it will become easier to do so.

That’s why the airline has signed up to buy up to 300 new Boeing 737 MAX 8-200s – which at 200 seats will be the biggest version ever of the 7237 that Southwest ever has flown (and it only flies 737s). It not only will need to carry passengers willing to pay more, it will need to carry more of them. It’s also why Southwest also now is expanding beyond the domestic market and into Mexico, Canada and the Caribbean.  As bank robber Willy Sutton famously said when asked why he robbed banks, “that’s where the money is.”

And don’t be totally surprised if the carrier begins charging its passengers at least some fees. If so, it wouldn’t be the first time that the carrier has abandoned a major advertising theme because of economic realities. In the 1980s and 1990s Southwest’s entire advertising effort was built around  its unequaled operating efficiency. It even had a huge trophy, called the Triple Crown, created  so that it could awarded it to itself for leading the industry in all three of the major customer satisfaction statistical categories – fewest mishandled bags, fewest passenger complaints, and best on-time arrival performance. But as it grew and began expanding into bigger markets with more congested airports, its smooth operations grew considerably rougher. Today Southwest is a middle of the pack performer in all of those categories. The rising pressure to seek Big Dollar passengers and to carry more travelers per flight will only complicate and slow down its operations even further. You likely will never hear a Southwest executive say the words “Triple Crown” again.

Malaysia Airlines sued over alleged in-flight sex attack

AN AUSTRALIAN woman who alleged she was sexually assaulted by a Malaysia Airlines’ steward on a flight to Paris is now suing the carrier under the Montreal Convention for more than $200,000.

Laura Bushney, 28, travelled from Kuala Lumpur to Paris with Malaysia Airlines on August 4, 2014.
Her alleged attacker, Chief Steward Mohd Rosli Bin Ab Karim, is currently on bail in France awaiting trial after allegedly confessing to the crime and being charged by French authorities.

Ms Bushney’s Statement of Claim filed by Shine Lawyers in the Federal Court of Western Australia details the alleged ordeal which continued for several hours of the 13-hour flight.

The statement said it began after Ms Bushney informed the cabin crew of her fear of flying and the Chief Steward promised to “check on her” during the trip.

Over the 13-hour duration of the flight, Ms Bushney alleged the Chief Steward escalated his contact from a leg rub to rubbing her stomach and thighs, then eventually putting his hand inside her pants and touching her genitalia.

When this occurred, Ms Bushney said she was physically sick and the Chief Steward walked away.
After arriving at Charles de Gaulle Airport, Ms Bushney told a Malaysia Airlines official she had been sexually assaulted, and was told “there would be repercussions against her if the allegations were false”.

“The applicant stated that she wished to proceed with the complaint (and) French police took the Chief Steward to a police station within the airport,” said the statement.
“The applicant (Ms Bushney) agreed to undergo DNA testing.”
After several months of investigation, French police charged Mr Mohd with indecent assault and he is currently on bail.

Malaysia Airlines terminated his employment two weeks after the alleged incident, and on August 25, 2014 Ms Bushney spoke out about her ordeal on television in Australia.
Under the Montreal Convention, Ms Bushney had two years to seek compensation based on physical injuries she suffered in the attack as well as financial losses.

The Statement of Claim said her “bodily injuries” included genital trauma and redness, abrasions, physical manifestations from the shock of the assault including tears and sleeplessness, racing heart, nausea and post-traumatic stress disorder.

“As a consequence of the injuries, she has endured and continues to endure pain and suffering, inconvenience and loss of enjoyment of amenities of life, has lost income and has been left with a permanent disability,” said the statement.

In addition to the $200,000 compensation allowable under the first tier of the Montreal Convention, Ms Bushney is seeking interest on damages, costs and interest on costs, as well as “further or other relief that the court considers just”.

The Convention is the same law under which families of MH17 and MH370 passengers are seeking compensation from Malaysia Airlines for their loved ones’ deaths.
Australian next of kin are seeking damages for economic loss and nervous shock in claims expected to total millions of dollars.

Malaysia Airlines did not take the opportunity to provide a statement in response to Ms Bushney’s claim.