Transportation Workers Union Local 555 on August 3 became the fourth union at Southwest Airlines to express no confidence in the airline’s Chief Executive Officer Gary Kelly and Chief Operations Officer Mike Van de Ven and call for a change of leadership at the top.
The Southwest Airlines Pilots Association (SWAPA) was the first union to take a no confidence vote. The SWAPA executive board on August 1 voted 20-0 for a no confidence resolution.
“After years of operational failures and a degradation of our culture that risks slowly eroding our loyal customer base, we must speak up and be catalysts for change,” said Captain Jon Weaks, president of SWAPA, explaining his union’s no confidence vote. “We are faithful to our company and its founding principles, and we feel that our CEO and COO have broken the faith with both.”
“Over the past several years, Southwest Airlines CEO Gary Kelly and COO Mike Van de Ven have failed to recognize and adequately fix the operational failures that continue to plague our airline,” said TWU Local 556 president Audrey Stone. “Our flight attendants, along with other front-line employees, end up bearing the brunt of these failures. Management’s failures continue to erode the morale of employees, endangering the famous culture upon which our beloved airline was founded.”
The unions say that despite record profits Kelly and Van de Ven have not made the investments needed to upgrade the Southwest’s crumbling infrastructure such as the company’s threadbare computer system and aging fleet of airplanes.
The result has been a series of gaffes like July’s mammoth computer system shutdown that caused hundreds of flight delays and cancellations that stranded thousands of passengers and ruined their travel plans.
Greg Puriski, president Local 555, whose members are baggage handlers and ground operations workers, said that the computer breakdown was the last straw for a beleaguered workforce who had to clean up the mess caused by Southwest’s system failure.
“After witnessing the recent electronic meltdown that left customers and flight crews stranded in airports (and) our members trying to pick up the pieces of delayed and cancelled flights, we will no longer remain silent but join with SWAPA, AMFA and TWU 556 in declaring our vote of ‘no confidence,'” said Puriski.
Bloomberg reports that the company’s computer system crashed in July “after an old router and its backup system failed.”
Another Southwest computer crash that stranded thousands of passengers and flight crews occurred in 2015. That one was blamed on “outdated technology.”
Southwest’s computer system isn’t the only thing that’s old and outdated. According to SWAPA, Southwest operates the oldest fleet of airplanes in the airline industry, which also has caused flight delays and cancellations.
The unions say that instead of fixing these problem, Southwest has been using its record profits to buy back stock from investors.
Southwest spent $700 million on stock buybacks in the second quarter of its fiscal year, and $3.1 billion on buybacks during the last three years.
Southwest’s board of directors recently authorized another $2 billion for stock buybacks.
Southwest isn’t alone in spending its profits on buybacks rather than on investing in innovation and employees.
Nick Haneuer writing for the Atlantic reports that between 2004 and 2015, corporations spent $6.9 trillion on stock buybacks, and in the last ten years, corporations on the S&P 500 index have spent 54 percent of their profits on stock buybacks.
“Today, these buybacks drain trillions of dollars of windfall profits out of the real economy and into a paper asset bubble, inflating share prices while producing nothing of tangible value,” writes Haneuer, an entrepreneur and venture capitalist.
While the buybacks might not do anything to create “tangible value,” they do a lot to boost the compensation of executives such as Kelly and Van de Ven.
Much of Kelly’s and Van de Ven’s compensation is in the form of company stock. When companies buy back their stock from investors, the price of stock increases because there are fewer shares on the market.
While Kelly and Van de Ven have failed to make the capital investments needed to maintain quality service, they’ve also failed to invest in their employees.
Three of the unions, SWAPA, TWU Local 556, and AMFA have been in protracted collective bargaining negotiations with Southwest. Local 556 and SWAPA have been negotiating since 2013 and AMFA since 2012.
Since 2013, Southwest has reported net income of more than $4 billion. Each year since 2013 has been a record year for profits.
Local 556 reports that Southwest’s estimated year-to-date profits for 2016 are $1.379 billion. If Southwest continues at this rate, 2016 profits will be $2.364, another record-breaking profit year.
Despite the record profits, Southwest has been reluctant to agree to fair contracts with the three unions and negotiations have stalled
In a message to its members, Local 556 said that the computer breakdown in July had changed the dynamics of its negotiations with management.
“We have further put management on notice that the nature of these ongoing contract negotiations has changed due to this event,” reads the message. “Excuses given in the past are no longer valid; protections once taken for granted have failed the flight attendants, and that is intolerable. We expect contract language guaranteeing that we will not be abused due to inadequate staffing of reserves, that there will be solutions should there be issues with procuring hotels, and, finally, that our members are in no mood to even consider an Extended Duty Day (a company demand that if implemented would significantly reduce flight attendant’s free time).”
Local 556 members will be holding informational picket lines on August 8 at airports in Atlanta, Baltimore, Chicago, Dallas, Denver, Houston, Las Vegas, Oakland, and Phoenix.
“We’re picketing to show unity and solidarity with our union sisters and brothers,” reads an explanation of the picketing. “It’s an opportunity to have your voice heard and to fight for the contract we deserve.”