Amy Robinson:
Today's SWAPA Number is 20, as in 20 questions, because that's what we're doing today on the show with typical host, Kurt Heidemann, who also happens to be a part of the NC.
Mike Panebianco:
We've been in negotiations for more than three years, and the SEP process ran for two years before that. With that much time, a lot of our pilots either forgot or weren't here to know the why's behind some of our asks and how the NC conducts our negotiations. So today, we spent some time talking with Kurt about those why's.
I'm Mike Panebianco.
Amy Robinson:
And I'm Amy Robinson. And here's our interview with Kurt. Let's just go ahead and start with a real basic one, Kurt. Why a rewrite?
Kurt Heidemann:
Well, we have to go all the way back to 2018. 2019. We came out of 2016. We had a new contract, but it was still based on the old language. So we started out with the SEP process back in 2017, and that was to capture all of our pilot's interests and needs that had been sort of left behind as the Company had evolved from little southwest, old southwest of the eighties and nineties, into really a completely different airline through the 2000s and 2010s. So we need the new language in order to solve the 150 ish grievances that we have. We don't have any notes on, or the notes are really lacking from many of the things that we've been operating under for years. So this was an opportunity to capture all of those sort of at one time and start fresh, clean sheet, and really provide the Company with the infrastructure in order to continue to operate the modern system that we have today.
Amy Robinson:
So Kurt, we get this question a lot, but why do we not release polling?
Kurt Heidemann:
The simple answer is because it's sensitive information. If the Company saw the polling results, they would be able to craft a 51% solution. We don't want that. We know what our pilots want and need to ratify. And so I get that the lack of transparency, seeming lack of transparency to our pilots can be frustrating. And I get the question, well, how do I know you're following the will of the membership? And the answer to that is very simple. We report to the board and the board is the membership. They are the elected members to represent the membership. And then number two, every one of us, 10 or 11,000 pilots will have an opportunity to vote on this deal, and you will judge individually if we met your expectations for this contract.
So at that point, it doesn't matter if 70% of the pilots said this or 30% of the pilots wanted that. If it's what you want when that TA comes to your desk to vote on, that's what matters. So the polling is used as guidance to us and it serves no purpose to release it other than weaken our ability to negotiate for you.
Mike Panebianco:
Kurt, I think as a line pilot and as somebody who's watched the SEP process and the continuous polling going on over the past few years, one of the big things that was addressed in the flight plan 2020 as well as the blueprint was leg change override as a solution to reassignments and some of the detriment that comes with that through the Company's addiction to reassignment. Can you talk about why we went after that in particular, and what does it do for our pilots?
Kurt Heidemann:
Sure. I think we're pretty familiar with a daily reassignment pay today, what we use with you get move ups, get premium, or if you get reassigned in certain periods you get premium, sometimes you don't. And we're comfortable with that in terms of we understand it because lived with it for all this time, but it really, really is complicated. There are really a lot of exceptions and loopholes that really make it a difficult system for us to understand. So leg change override, while it might sound complicated, the first time you hear it is really simple. It really is probably about five different rules and if you apply these five rules, whether it's inside the footprint or outside the footprint, if it's a change greater than your leg or if it's less than that, so you're always pay protected like we are today. What that whole process does is it simplifies the reassignment pay process and it protects our pilots.
Like you said, bait and switch is a huge issue that our guys are really frustrated with and bidding on that Dallas Houston turn that pays 6.5 premium and then you get out there and then they end up rerouting you around the system for an entire day. You thought you were going to be back in four hours, but instead you're back 12 hours later and maybe you've made an extra TFP out of it. You can imagine why our pilots are frustrated. So this will be part of that solution. I would also say with LCO, a lot of our problems come from pay errors and with this simplified system, it really, really we believe is going to simplify the pay structure to where we won't be losing millions of dollars in incorrect audits, like we have since, what? 2015, since we started tracking.
Amy Robinson:
I also want to take a second and just kind of issue a little bit of a push to some of the education that we've already put out about LCO. I mean, we've been talking about this since flight plan 2020 back in when we started this negotiation. And so we do have a lot of background material on that for people to take a look at and I do think we'll have more, I assume. Correct, Kurt?
Kurt Heidemann:
Right, absolutely. Yeah, a couple of things. First of all with the education, we've gotten a lot of questions about it since we said that we're going to this LCO and we've tried to answer a few of those one-offs, but there are just hundreds of questions, honestly, that we're getting in. Right now, we're trying to get the last of the contract closed out. We're hoping to get this thing done sooner than later. And if we were to answer all of those questions right now, we're just not in a position where we can do the education on it. So there is stuff that we're working on that if we do get a TA, if we do get an AIP and the board makes it a TA, that stuff will be ready to go. And before I jump off on this, I do want to give one little shout out to SRC.
I don't know if our membership realizes this, leg change override was pretty much invented by SRC back in the SEP process. They came up with this override concept and then over the years in meetings with other unions, they've had scheduling summits and the other unions saw this as really a smart idea. And in the time that our guys came up with it, Delta has implemented it and American has a version of it and they've taken this system that we have and now it's kind of become industry standard. So it's kind of funny that we're playing catch up with something that we actually, our SRC invented, so kudos to our team for coming up with that in the first place.
Amy Robinson:
Okay, so Kurt, my next question is why pay multiples?
Kurt Heidemann:
Again, I think we're trying to solve the problem of working more for no additional pay. The pay multiples, for those that aren't familiar today, when you work a premium trip, you get paid premium on the legs only. So if you fly four TFP worth of legs, 50% more is two, so you get six TFP, then you get the daily rig, which is five or the ADG, whichever is greater. So that gets you to six 6.5. In 2020, it's on the legs or the daily rigs. So in this case it would be four up to six, but the daily rig is five, that's your DPM. Or it could be your DHR if it's a long day, if you had some sit time in there. So your DHR or your DPM times two, which would be 10. And so I think what a lot of the questions revolve around, well, why isn't it 50% on 6.5, because that's the pay for the day, why isn't it 50% of that?
And the simple answer there is it's 50% on the daily rig. Again, daily rigs are DPM and DHR. ADG by definition is average daily guarantee. It's an average, it's not a daily guarantee. You apply that to the trip, same way you do with time away from base rig, that applies to the whole thing. So you can have one day that's a premium day and the next day isn't, and you can't apply the ADG across those. So that's why it is and I get that, I mean, I get that 50% more of five TFP is less than 50% more of 6.5. I don't think anybody argues with that math, but that's just not how the structure works. What's important to remember is in 2020, all of the LCO, all of the other overrides that we've negotiated go on top of the pay multiple. And so that pay multiple serves more as a floor or a guarantee than anything else. So you'll always see more money under the pay multiple concept than you do today.
Amy Robinson:
Let's move on to a different why and why a schedule execution seemed to be the last section we're closing.
Kurt Heidemann:
That's really what we've been fighting all along. We don't have a planning problem. You've heard that before. We have a schedule execution problem. And so the Company has, through arbitrations over the years, won the right to do a thing. And Jody has said this all the time. He says the Company has won the right to do something, but just because you have that right doesn't mean you should do that right. And what he's talking about is unlimited reassignments. And so the Company has taken our language that says one thing, and it's been interpreted and agreed to in arbitration as another. And so they want this unlimited flexibility and they're so afraid of putting any kind of constraints on it. And when we talk about, "Hey, let's come up with some common sense solutions or limitations. Do you always need to have 24 hours to reassign a guy? Aren't you doing that kind of as they come in one-on-one?"
And the answer is always, well, we have to worry about the meltdown. The Christmas meltdown is always the example that, well, we can't commit to anything because what if we have another meltdown? And honestly, our side saying if we have another meltdown, that's the least of our concerns. So this Company needs to get its act together. So it's really fundamentally comes down to that. They're willing to put limitations and some structure around all of the scheduling things up to day of execution, but they're so resistant to that, and of course, that's what we're trying to solve for the most.
Amy Robinson:
You said that a training bid is definitely coming. Why is that?
Kurt Heidemann:
Well, like I said, even Carl said that we needed to rewrite the training section. We have just suffered, and probably Mike should speak more to this than I should as a contract admin guy or former contract admin, all of the problems that we've had in training over the years, it's a really out of date section that we have right now, and really we're trying to fix the sins of the past. We've had some people that worked in that department who took fortunately VSP and they're no longer there, but they really caused a great deal of problems between the association and the Company. For CQT, I think it was from '17 to '19, we got paid three different ways under the same contract language. I mean, it's the same language and they paid us differently each year, whether it was because you had to come in early for EET or because they had to keep you an extra day for a different type of training.
So it was all this, it was just making it up as they went along, and so we really had to get our arms around it and I know it seems like it's not that big of a deal for a lot of us because we only go to trading once a year, but it's almost everybody that goes in that one month. It gets something strange happened to them, whether they get moved up like 800 of our pilots did back in May, or whatever. It's really a difficult thing, and it really shouldn't be for a one time a year thing. So that's why we're really going after the training bid and fixing training pay and really kind of putting some boundaries around the lead ops and scheduling.
Mike Panebianco:
That was very frustrating from the contract admin standpoint just because of the varying footprint from year to year and depending on where you commute from and when they decide to start the class, sometimes they started in the afternoon, they've had so many different footprints, just created a lot of frustration. So definitely a more streamlined and uniform approach to how we get paid in training is in the bids. Being frustrated as being senior and not getting the week you wanted, not getting the same period that you wanted, that will be a huge benefit to our pilots.
Kurt Heidemann:
Yeah, we said that. We told them early on if you would just honor preferences like you used to many years ago, we wouldn't be having this conversation. But to your point, our senior guys particularly were frustrated that I'm a four digit guy and I'm not getting my first choice for training. How could that not be the case? So we had those conversations as well.
Mike Panebianco:
Big shift in the question now, Kurt. Something that came up recently and was discussed amongst the membership, I don't think a full understanding of it was ever achieved, co-terminals. Why does Southwest want co terminals and why did we agree to look into it?
Kurt Heidemann:
First of all, I'm basing this on what our schedule research committee experts say, and I think that that's important because you and I both, Mike, when we hear the Company wants something, I think we go, "Okay, what are they getting at?"
Mike Panebianco:
Yeah. What are they really after?
Kurt Heidemann:
Honestly, SRC looks at it and they can see what the matrix is and what they're telling us is, it's reasonable because we are gate limited in Midway, we are gate limited at Love, and if we want to grow those markets anymore, we need to offload that. That's why they moved to O'Hare during the pandemic. They can't do it to DFW yet, but for those that aren't in the DFW area, they are building a new terminal out there at DFW Airport and maybe Southwest will get some of those gates, maybe they won't, but that's not for SWAPA to decide, but what it does is it gives them an opportunity to grow there. I think it's important for our pilots to recognize that this growth would be on top of those operations at the domiciles. There's not a business case for, if we give them 20% limit, for them to just tomorrow wake up and say, all right, we're reducing hobby flying by 20% and moving it to intercontinental.
That's just not how the airline business works. It works through size, so you want to stay as big as you can in the market that you're in. So hobby is big. They're not going to reduce it to move flying up to Intercontinental. It will be additive up there. And our position is that that helps the guys that live up on the north side of Houston, up in the Woodlands, up in Montgomery in that area, and it doesn't harm the guys on the south side that are living down in Sugarland or down along the Galveston area. Same thing with all the other cities. So if the Company wants them, we will entertain it, but we had to put very clear limitations on it and very clear protections. And I think that we've achieved that and when it goes out to the board and then the membership, they'll be the ones to decide if we hit the mark.
Amy Robinson:
So again, we've seen a lot of back and forth on this, so why did we agree to this again? I want to make that clear for our membership.
Kurt Heidemann:
Well, we agreed to it because it is a negotiation. The Company has interests, we have interests. What we were able to accomplish and why we agreed to it was a path for SRC and the NC to achieve basically everything that we set out in the scheduled planning section, all of the commutable pairings, the domicile specific pairing mixes, some commuter rules. All of those things were made available, became a path to agreement through co-terminals, and we saw it not as a risk, but as an opportunity to expand in those cities that are currently constrained and ultimately do what we want to do, which is grow the Company. I get that there's a lot of questions about it and I get there's also a lot of misinformation out on social media, to be quite honest, and we would love to be able to answer these questions as they come in and we kind of learned our lesson from it by this transparency comes with its costs of having to handle these as they come in.
So that's part of why we haven't been as transparent with some of the last few weeks, because we're really trying to get down and close things out so that our pilots can see everything all at once. We will have a lot of education. We'll have a whole product just on co-terminals. We'll have a whole product just on LCO, so we're working on those right now, if the deal materializes.
Amy Robinson:
And also, the NC will be able to answer these questions and at some point after this is sort of closed out too, correct?
Kurt Heidemann:
Oh, absolutely. And that's another good opportunity to pitch the Contract 2020 resource page over on the SWAPA website. We do have an open Q and A right now where guys can ask their questions, they come in to us and we answer them. I think there's been two that we haven't answered out of all of them, so the rest at least you get a response. Honestly, if you ask an LCO question, it's going to be, "Sorry, we can't answer that right now, but we'll get to it when we get an AIP." But a lot of other questions you can go on there and see what people are asking about and what their concerns are.
Mike Panebianco:
Let's roll along a little bit and talk about something that's near and dear to so many of our pilots. We've done so many podcasts talking about the shortcomings of benefits. Where was the big push for us to open on benefits? Where did we go? What are we trying to achieve in that area? And I'm speaking as a pilot with special issuances. This is a big deal for me and it is a key to my vote.
Kurt Heidemann:
Well, and I appreciate that and I think that unfortunately most of us have to go through something before we realize how important it is, and I think SWAPA and Damian Jeanette in particular have done a really good job of highlighting that we all need to pay attention to benefits and disability now, before we need them. So the short version of what we're trying to achieve is of course fix the disability system that we operate under today. Under our current LOL, a pilot who goes out as limited to five years or half as longevity, whichever is longer, and he has to wait about six months to start benefits. And I say about, because like everything else in our contract, it is so complicated. There's like three pages of the math that goes behind when you start your disability benefits. You look at other contracts and it says after 90 days benefits start, period.
There's no crazy calculation, but it's just kind of this leftover artifact of how we operate. So we want to simplify it. We want to get the proper coverage. Currently, we have caps on the coverage limit. The other big four airlines do 50% uncapped. So that sort of is what we see as a floor, and then we're trying to get some medical cost containment in there. That's kind of a big deal for our pilots. We all know costs are going through the roof year after year. Getting arms around that I think is a big goal of ours. And of course it goes without saying, but I'll say it anyway, we have to preserve the regular plan. About 40% of our pilots are on the regular plan, myself included. Actually, I think we have about five pilots out of seven on our team that are on the regular plan. So we really see the value in it. It's something that we're very conscious of and our pilots feel strongly about it.
Amy Robinson:
My next question is why did we try for the market-based cash balance plan?
Kurt Heidemann:
Well, I'll say this, we didn't try for it, we achieved it. We will have a market-based cash balance plan in Contract 2020. Market-based cash balance plan is a defined benefit plan versus a defined contribution plan like a 401K. It's like it's a pension type plan that the Company contributes to, and it's a relatively new interpretation of the IRS rules have allowed it. It's typically been used at doctor's offices and lawyers offices with a few very high earning individuals, but recent rules changes have made it available to highly compensated employees that are unionized, like airline pilots. So it's an opportunity to save beyond the limits that we have today. The 415C excess limit, which is about $66,000 this year. I might be off on that, but Damian will correct me. And if you want to save more than that, it has to go in a non-qualified account or just a non-tax sheltered account.
So this allows us to go beyond that. The downside to it is that it's a very safe fund. It's not going to be a NASDAQ ETF multiple three type thing. It's going to be a 40/60, 40 stocks, 60 bond or something like that. Very conservative investment. So it's kind of that trade off it get more qualified at a much more conservative investment amount. So we're trying to find the right balance. Other airlines only use spill cash, and the thing about our market-based cash balance plan is it's required, it's mandatory. So right now we protect our spill cash through the non-qual plans, but they are optional for each pilot. I can sign up for it, Mike, you don't have to. Or I can even go in and out of it one year in one and out the next. Since market-based is for all pilots, if you just have spill cash, all you're doing is effectively taking away that choice from our pilots. So we're looking for alternative funding mechanisms, either a direct fund or some other way to get money that's additive, not to replace the non qual-plans that we have today.
Mike Panebianco:
A follow-up, Kurt. With retirement market-based cash balance plan is awesome. What is the goal for the NEC in this negotiation? Where should we look to go with that?
Kurt Heidemann:
We should go with more. That's the short answer, right? When we entered negotiations, we were at 15%, all the other airlines were at 16. The other three have gotten deals since then and they've gone to 17 and going to 18 in two years. So we need to at least match that. Of course, our interest is to exceed that. Maybe there's an opportunity there for us to do something with market base and the NEC, since they're both qualified savings where we can achieve our goals using a combination of those two.
Mike Panebianco:
That's a great benefit to our pilots, especially many of the junior pilots that are going to be seeing some rate increases, hourly rate increases and they're going to need places for that money to go to prepare themselves for retirement. Want to roll along into something that we get a lot of questions on. I hear a lot of questions on and out on the line when I'm out. What is the story with long call reserve? Are we getting it, not getting it? Did we pursue it? What does that look like for our reserve pilots?
Kurt Heidemann:
Yeah, I know this question frustrates our team quite a bit. The short answer is no, we don't have long call reserve. And so the question is why? The answer is what are you trying to achieve? That's the question you always ask somebody in negotiations. You don't say, I can't do this for you or you don't want this. You say, what are you trying to achieve? And what we're trying to achieve with long call when you ask the guys is they want to be able to have a trip. They don't want to commute in and sit on standby waiting to go fly. They want to know what they're doing. They don't want to commute in for a 350 wrap start or 305 wrap start when they don't go to work until 8:00 AM. So what we did instead was we took the features of long call and we'd fit them into our unique reserve system, specifically released to check-in. That accomplishes mostly what long call does.
The other thing that guys kind of gloss over when they say I want long call, is most airlines, when we look at them, the complaint is nearly every pilot on long call that doesn't get assigned a trip gets shifted into short call. It's in their contract and some most OALs allow them to shift a certain amount, which is effectively almost all of them, into a short call anyway. So yeah, you have long call when you bid, but if you don't get a trip, guess what? They move you to short call and you got to be there the night before anyway, so it sounds better than it really is in practice. And so reserve release until check-in, we're working on reserve ELIT, we're working on release at the end of the trip, fixing the pay differential from line flying. Those are the ways that we're going to improve our reserve, not by just adopting the system that somebody else has. Long call just adds more bodies to an already over full reserve system that we want to shrink the reserves and put more flying into the lines, and that does the exact opposite.
Amy Robinson:
So Kurt, one of the sections that's a little bit different this time is an IT section. Why did we need that?
Kurt Heidemann:
I don't think anybody here listening to this podcast thinks that Southwest Airlines is an IT powerhouse. We've suffered from that for years. We won't get into the Christmas meltdown. That's a whole other thing. But remember that we wrote this contract proposal back in 2018 and '19, and so we included IT back then recognizing that the Company had some shortcomings and lack of investment in IT and IT infrastructure for years, and it was chronic and we needed to get it fixed. For those that weren't here back then, we had months and months and months, I think it ran over a whole year of ELIT opening on the 25th of each month where the [inaudible 00:27:24] would crash. So you can imagine how the feeding frenzy is and imagine logging in and taking your day off, bidding your schedule around it and then it crashes and then when it comes back up, you're the last to know and you missed out on ELIT.
That happened month after month in almost every domicile for almost a year, or a year or more. Back in '16, we were negotiating in San Antonio one week. I remember it clearly. That was the week of the great router brown out. You remember there was a one in a thousand chance that this router would brown out and it shut down the whole operation. Ironically, the Company had to drive home, do the drive home of shame instead of fly home because basically everything shut down that week. That actually led to a vote of no confidence on Gary Kelly and Mike Van de Ven specifically, and I'd like to just remind everybody those were never rescinded. So those came out then.
IT is going to be essential. It's essential today. It's going to be even more as we move forward, as we expand this operation and there's no reason why we can't invest a reasonable amount of resources to improve the pilot experience when it comes to IT. We have an electronic bid system built into CWA, but how many guys use it? Like a single digit percent? Everybody uses third party apps because it's just a superior product. Those are the type of things that we need to address, get the Company to invest on pilot facing resources. We can go all into Crew Hub, all that stuff, but it's an essential part and we need to make progress going forward.
Mike Panebianco:
Moving on to a very sensitive topic that for a lot of our pilots, we own probably the best section one language in the entire industry. And when we talk about section one, a lot of our new pilots aren't going to really recognize some of the metrics that we use or how we protect our pilots or our operation because there are a lot of different protections that we use to measure code sharing or inner lining. And section one is that future protection for our pilot group. One of those terms is PDEW, P-D-E-W. Kurt, could you talk a little bit about why do we use PDEWs? What does it mean, and what is our goal for protecting our scope in this contract?
Kurt Heidemann:
Sure. Well, PDEW, to start out with, is passengers daily each way. It's a metric that we use to measure traffic count, basically passenger count. It's available through public sources, so a third party sources, so we don't have to rely solely on the Company reporting it to us, no matter who the other carrier is. All that stuff is available to us. You're right, we do have industry leading scope. I don't think that anybody questions that. We have locked it down. We locked it down back in 15. NC-1 and TA-1 did a fantastic job of building a framework for us and then we kind of closed up a couple of small loopholes in TA-2 back in '16 and we are good.
There's going to be some education on it, not because anything's really changing very much, but we should understand how it works. And so I appreciate the question about what is PDEW, codeshare inner line. We'll have a whole podcast on that topic as we come into education, but it's worth mentioning that our interest is to protect what we have, and any changes that we do make have to ensure that our pilot's protections within section one are maintained.
Mike Panebianco:
One of the things that I recall from the 2016 campaign, and I know you were front and center on this, Kurt, was the frustration that our pilot group from everybody inside SWAPA all the way through the pilot group, was the implementation schedule. What's different about this approach to Contract 2020, specifically in how we are going to approach implementation?
Kurt Heidemann:
Yeah. Well, you're right. Implementation, if I had to give us a bad mark in '16, I would say implementation was probably one of our low points. I was there in Valencia when we got the deal and we're all excited and we announced an AIP and John Casey put out a video and we were all excited and we ran back to Dallas to finalize the language. And when we got back, we realized, oh no, the NEC that we agreed to wasn't legal under the IRS rules or the ERISA law. So there were these things that all of a sudden we thought that we had all in agreement, and so it made us look bad, made us have to scramble. And so we learned from that and we internally have said, we cannot do that again. We really have to make sure that all the I's are dotted, all the T's are crossed when we go to the board and say, look, this is ready.
The problem that we're having is, like it or not, this contract has huge, huge IT needs and a huge lift for Southwest IT to put this into implementation. So that's kind of where we're at right now in this whole negotiation. And that's honestly one of the biggest holdups right now to reaching a final deal, is what does that timeline look like? It does us no good if we have this industry-leading contract that doesn't get implemented for five years. We need to figure out what we can do today or on data of ratification, whether it's manual until automated, there's going to be a lot of that, or what our priorities are. Do we have to have some of these nice to have features, electronic notifications of changes in the vacation week inventory? Yeah, I'd like to be notified when my week that I want is available, like line tuner.
But that's definitely not as important as prioritizing getting our pay, right? So we have to organize that so that product, that implementation timeline, will be provided to the board when we go and provide them with the AIP. That implementation plan will be provided to the membership when we provide them with the TA. So there's no ifs and or buts about it. You will see that when it comes out. If it takes us an extra week or two to build that implementation plan, that will delay us going to the membership. That's what we've committed to do.
Amy Robinson:
Thank you, Kurt, for being a good sport and coming on the podcast and allowing us to grill him about some of the background on negotiating positions and why they matter to our pilots.
Mike Panebianco:
If you have any feedback for us at all, please drop us a line at [email protected].
Amy Robinson:
And finally, today's bonus number is 2020. That's a very blatant plug for the Contract 2020 page on SWAPA.org. Those pages contain a wealth of resources that answer not only all of these questions, but are also an option for you to ask questions of the NC directly. Every pilot should be educated as to what the NC is asking for on your behalf. And these pages are an excellent place to start, should you need a refresher or even if you just started and need to get up to speed.