Kurt Heidemann:
Today's SWAPA Number is 99.2. That's the percentage of pilots who voted yes to the strike authorization vote. That number was very impressive and clearly showed our pilots resolved.
Amy Robinson:
Because of that historic vote, on today's show, we spoke with SWAPA President, Casey Murray, about those numbers and what they mean for our pilot group as well as what the future holds.
I'm Amy Robinson.
Kurt Heidemann:
I'm Kurt Heidemann, and here's our interview with Casey.
Casey, let's talk about the headline number. 99.2% of our pilots voted yes. That's pretty impressive. What does that mean to you?
Casey Murray:
Well, it's not surprising at all. I think SWAPA, I think our board of directors, the work the SPC's done, I think that we felt very strongly that we were going to get numbers that exceeded our peers, and we did that. What really exceeded all expectations was the first six hours, the first 24 hours. In the first six hours, we had almost 80% of our pilots vote. Within the first 24 hours, we had over 92%. So our pilots were waiting, and it feels almost like there's some unrestrained anger, and they let their voice be heard. Like I said, within 24 hours, the vast, vast majority of pilots voted. Looking back on it and seeing where we ended up, I can't say it strongly enough, we've exceeded all of our peers, and even with the no votes, less than 1%. The pilots have sent a message and now it is up to Southwest Airlines to respond and respond positively.
Kurt Heidemann:
I would say that from the comm perspective, we saw that as well. We actually had pilots emailing and calling early that morning saying, "Why can't I vote? I want to vote early." There was that real need and desire to get the vote recorded. They wanted to have their message heard.
Casey Murray:
Well, a lot of times SWAPA speaks for me, and our pilots have that on their social media. They wear the lanyards, but when do they have a chance to really express their voice? This was really it. Again, the pilots stepped up.
Kurt Heidemann:
You said it compared, we outpaced all the other OALs. Can you speak to that and specifically how SWAPA's experience or lack of experience actually measured up to the ALPA carriers?
Casey Murray:
It's interesting when you look at a DNA of a Delta, they've been through furloughs, they've been through strikes. I always felt the DNA there was a little bit different. We actually recognized the Southwest pilots in our DNA, and so we took a little bit more time and took a much more measured approach to making sure that our pilots were informed, were engaged. That's why the May 1st date was really important. Again, in recognizing that we wanted it open for a full month, but our pilots were very, very clear and loud in their voice when they came out and they voted. So ultimately, we decided that we would go ahead and close the vote early.
Kurt Heidemann:
So we did close the vote early. Speak to that, because obviously we were supposed to go to May 31st, and in 10 days, 12 days, we closed the vote. Talk about that decision process for the board.
Casey Murray:
Well, I don't think the board nor myself really ever considered closing it early, but once we saw after seven days that we were well over 97% participation, that there was going to come a point, and we started seeing it earlier this week where the votes were trickling in. We'd get updates about every six hours, and we were getting one or two votes a day. So really what this allowed us to do was to allow the board then to take this information and make some decisions to allow us to move forward with now what our mandate was from our membership.
Amy Robinson:
Are you concerned that certain pilots didn't get the chance to vote?
Casey Murray:
Yeah, that's always a concern, but we're only talking less than 230, and so the board as a whole felt and as did we, the execs at SWAPA, that closing it, making some decisions and starting with the work that comes with a successful SAV needed to be started.
Kurt Heidemann:
I don't want to talk about it in a negative light, but we did have less than 100, but we had several dozen no votes. Can you speak to that and what that represents and how that impacts us going forward?
Casey Murray:
Well, there's going to be no votes and we expected them, but the fact that it was less than 1% of our pilots that really felt strongly enough really speaks more towards, I think, not who voted no, but the vast majority that voted yes. I think it allows us to really focus on that and make our strategic plan moving forward to make sure we get to a successful conclusion of the RLA process. It allows us to go forward as we run up the hill, as Jody runs up the hill, we no longer have to look behind us. We know who's behind us, and that's a very empowered feeling.
Kurt Heidemann:
So speaking of continuing out the RLA process, what is the next step? What can our membership expect in the next week, next month?
Casey Murray:
Well, there's two different ways to look at that. Regardless of the SAV, Jody and the entire team in the room are making very little progress. So that's going to bring up the next step, which again, regardless of the SAV, that's going to bring up the impasse word and probably sooner than later. If progress is nil, then we're going to make a plea to the NMB declare an impasse, but adding in then the SAV results and really the strength and how loud that voice was that our pilot spoke with, we're going to move forward with many different events as well as a lot more communication external to our pilots in exactly what that means and where our pilots are and what they're demanding as far as a conclusion to this negotiation cycle.
Amy Robinson:
So you said you were looking to have an impasse declared. Is Jody going to be asking for that immediately or is that something that is going to happen imminently?
Casey Murray:
Well, so I said the SAV doesn't really drive that. The SAV speaks to where our pilots are at, but really what happens in the room is really where Jody is going to make that decision. Progress has been slow, but I've been to several sessions and seen progress. I've also seen negative progress, and so at some point Jody's going to have to make that call. It's not going to be driven by this, it's going to be driven by progress. Part of what has to drive that progress is this SAV, that has to speak to Southwest Airlines and where 10,000 of your own site leaders are demanding a conclusion to this is really what Jody then is going to use, is there progress or is there not?
Kurt Heidemann:
You mentioned being in the room and seeing that firsthand yourself. I do want to take a little detour here and ask you about the fact that SWAPA's pointed out that nobody on the Company side above their negotiating team has gotten firsthand knowledge witness to what goes on in the room. Do you see that as contributing to this delay or the problem we're getting as far as reaching an agreement? Is there something that they're responsible for with that?
Casey Murray:
Well, I do. I feel very strongly there needs to be some decision maker in the room and moving forward, I'm going to this week's in Atlanta. We have sessions in Philadelphia over the next few months and Mike Santoro's going to that one. There's also a Denver date and Tom McCoy's going to that one. So you have your three execs that will be attending as we move forward.
Kurt Heidemann:
In person?
Casey Murray:
In person. Now in the past and since we entered mediation, both Mike Santoro and I have listened via teams to a majority of the negotiating sessions. We are logged in and listening to each one, but we're also working and doing the business of SWAPA. So we have a pulse as well. That leads to a lot of confidence on our side and with the board of directors as we report to the board on where we're at, the information that we're getting, the perspective that we're getting from not only the SWAPA execs, but also from Jody and his team and then Southwest can't say the same thing.
Amy Robinson:
So let me ask you this. Andrew Watterson was quoted as saying people should be voting yes on the SAV. What are your thoughts on why would he say that?
Casey Murray:
So our CEO and COO both have accepted that this is a process and I think that's what Andrew Watterson was referring to. Divorce is a process as well, and it's not a good one, but there needs to be a recognition that we can get through this. Are we going to get done sooner or are we going to get done later? We could have been done a year ago and should have been done. Matter of fact, our CEO said, "You'll have a contract by October." He told the chief pilots last May a year ago, he told our board of directors last May at this exact same time. The problem, though, is that he didn't realize that that is in his hands.
Kurt Heidemann:
Explain what you mean by that.
Amy Robinson:
Yeah, because you've said that a few times publicly. What do you mean by that?
Casey Murray:
The reality is is that we are labor and they are the Company and we have asks and it is up to the Company to say yes or no, and that's fundamental to coming to an agreement. It's not that we're just asking for the moon because it's the moon, we have interests and our interests are the future survival of this Company. By any metric, you ask our customers, you ask Wall Street, you ask the stockholders of Southwest Airlines how Southwest is doing, and they'll all relay the same thing as well as any metric that the DOT uses to measure our performance, all of it is very bad. So our interests are to drive efficiency, to drive our productivity that we've seen falter, and that has to be relayed in relation to really what's holding us up, which is the scheduling side of it.
As both our CEO and COO have said numerous times, the money's going to work itself out, and it will, but why are we asking for and how does the scheduling systems work, that I don't believe is and is understood still to this day after three years of negotiating. Even though they've had it in their hands and can look through it and go through it, no one has, all they're wanting to do is just to negotiate to negotiate. So if our interests aren't understood and aren't relayed, then how can Mr. Jordan make a decision on yes and no on where we're at in our asks?
Kurt Heidemann:
I guess one expression I've heard is not making a decision is making a decision. So he is making a decision, just the decision is not to make one in this case.
Casey Murray:
Well, so how long is that acceptable? I'll equate this to the operational drift argument, we've seen it in the airline, whether it's meltdowns, whether it's our operational performance, it's become acceptable. What I've heard and from our negotiators as well as from our leaders and Flight Ops is, "Well, it's not as bad as it was last month. It's not as bad as it was last year," whatever it is, whatever metric it happens to be that we're discussing. That's where we've gotten to as an airline. That's unacceptable to us. That's unacceptable to a 23-year-old who just got hired at this airline and has 42 years left in his career. That's what has to be addressed. So not making a decision is not an excuse.
Kurt Heidemann:
You mentioned a list of people that are looking at us, whether it's the Wall Street or the DOT or the public, what is this SAV result going to mean to those outside organizations or agencies?
Casey Murray:
Well, I think sending a message from the onsite leaders of this Company, we're going to be able to go really to the next level of what our strategic plan has been. Now we can take the voice of all of our pilots. We can take it to the institutional investors. We can take it to Vanguard, we can take it to Prime Cap, State Street, BlackRock, T. Rowe Price, the five largest investors in this Company. We are approaching and hovering around a 52-week low for our stock price. So we're going to go and talk to them. We're going to talk to the media. We're going to talk to the analysts on Wall Street, and now we have a unified voice.
This isn't unionism, this is where the leaders of this Company, the onsite leaders of this Company are, and they're concerned. As I said, the 23-year-old we just hired, it is the Company's responsibility, but it is really SWAPA's primary function is security and the Company's not providing security for the rest of his career. So we're going to go and we are going to talk to the public, the traveling public. We're going to talk to the investors, we're going to talk to Wall Street and we're going to speak through our pilot's vote, through our pilot's voice.
Amy Robinson:
You talked about what is the message you're going to give to these investors and to the public, what is that?
Casey Murray:
Taking that operational drift, taking where the airline is, using those metrics, we cannot continue with this. I have said this numerous times. This is about the heart of Southwest Airlines. That's what we're doing. At the end of the day, if to save the heart of this airline to ensure our future, that might mean we have to strike. I told Bob Jordan face-to-face, "I am concerned that we're going to get to a strike." I said, "It's because of a failure of leadership and if that is the case, and if that is true, it is up to us to make sure that that doesn't happen, but that is the path that we're headed to, and we are going to strike if it means saving this Company."
Kurt Heidemann:
So those are very public things that we're about to go do, talking to the media, talking to the public, talking to Wall Street. Are there other things that we're doing behind the scenes that maybe our membership might not see that they should know is also happening simultaneously?
Casey Murray:
So yeah, there is a constant barrage of things that are going on, whether it is with the Company, whether it's with discussions with the upper echelons of Southwest leadership or whether it's just talking to our analysts on Wall Street who we've spent a long time developing relationships with. This is why we have spent money, time, and effort to develop these relationships. J.P. Morgan has come out very, very recently and said that they're downgrading Southwest stock because of operational worries, and that is the message. How much further are we going to allow this Company to sink? How much farther is the stock price going to go down? How much farther are their profits going to erode? How much more are our customers the lifeblood of that stock price? How much more are they going to take?
Kurt Heidemann:
So what's the message then to the traveling public? You said that that is one of your avenues. What would you say to them specifically?
Casey Murray:
So the message to them is going to be, "You've got to start thinking ahead and what is your gamble going to be on Southwest Airlines?" Are they going to correct not only the operational issues that are really separate from this negotiation with the understanding that we're trying to correct them scheduling wise because processes are where our failures are, but also are the pilots going to be there when it's time for you to go on vacation? Are the pilots going to be there when you have scheduled your honeymoon? That is going to become a much stronger message as we move forward. Again, our pilots have spoken and said that's where they're willing to go.
Amy Robinson:
So Delta and Alaska both held strike authorization votes and they get a deal pretty quickly thereafter. Do you suspect that we'll have the same thing?
Casey Murray:
I would not hope. Hope's not a strategy. I would believe that the company better listen to their own site leaders, and we better see a change in negotiation tactics as well as some work and some acceptance of what we're trying to do in the scheduling arena. As they've said, the rest of it will fall in place, but we are still several months out, if not six to eight from a deal. But is it two months or is it eight months? That's up to Southwest Airlines at this point.
Kurt Heidemann:
I think I've heard you talk about it before. You've described it more as a scale and not any one thing is going to flip the switch, but tell the listeners how you describe that.
Casey Murray:
I always consider negotiating leverage in relation to a scale. You put as much on your side as you can. The pilots have given us the ability to talk about the SAV and that goes on the scale. Pilot attrition, which we've heard a lot about goes on the scale. As of this recording, we're right at about 110 pilots that have left this year, 180 since we started hiring. Our COO used a culture of denial, and that's what we have been hit with. We've been told that number of pilots isn't leaving, and then they finally came to acceptance and they're like, "Well, but they're leaving because of they're going to a place where an airline that has a domicile." It's like, "Well, no, actually most of them are leaving from," because we've done this analytics, is, "the pilots that are leaving actually live, are based and their residence is in one of our domiciles, but they're actually going elsewhere." So we continue to put what we can on the scale for leverage, and that's what we're going to continue to do.
Kurt Heidemann:
She mentioned American, and I know that they held their SAV, but a lot of people don't realize they're in a very different place in their negotiations. Can you speak to that just a little bit and how it ties into the RLA?
Casey Murray:
So they are not in mediation. They have an SAV, and they are nowhere near a release, an impasse. They can't even ask because they're not in mediation, and the NMB ultimately drives that. So let's apply it to SWAPA. Kurt, you and I were doing most of the SEP work, at least on the shallow end. The deeper was the committee's writing, but part of a lot of the discussion that went on was the strategic plan on how we were going to go through negotiations and what's kind of, I think, prescient of where we ended up was we had always said, June of 2023 is when we're going to be pushing to do an SAV or a release from the NMB. Even with COVID, that ended up being where we ended up.
So we have thought through the contingencies, we have planned for the contingencies, and we are to a point where we've planned. It's very strategic on when we filed for mediation. It was very strategic now when we think we're getting towards a time when Southwest really needs to decide, are we going to draw this out to our detriment or are we going to have a solution? There is a difference in how we've approached this, which is very logical and very strategic. American, on the other hand, is taking an SAV and hopefully, we're going to see a deal from them sooner than later. But they are a long way from getting into the NMB process, filing for mediation, and then getting to release.
Kurt Heidemann:
Amy, before you ask your next question, I do have to say it sounds almost unbelievable that we picked June of 2023, but I want to just say for the record that I was looking at the board brief from December of 2019 that we gave going into the opening, and that is an actual true fact. That is not some exaggerated story. That has been on the table for three years.
Casey Murray:
I think it speaks to the representation and the union that SWAPA has become, and I'm proud of that.
Amy Robinson:
So the other resolution, the releasing of $7 million, I think it was 7.1 if I remember correctly. What is that for? What was that set up to do?
Casey Murray:
Yeah, I'm very proud of the board as much as I am our pilots. We had, again, strategic discussions on this, and we had talked through this. We did a dues increase last year to fund the SPC, to fund ultimately the negotiating committee with the SPC to get to this point. But this is a sea change in where we are at and where we are headed, building out strike centers, building out regional strike centers, which is going to start to occur is going to cost some money, the increased advertising on social media.
It's amazing where our social media progress has gotten to, but there is so much more we can do with it now that we've laid the groundwork and some of that is going to cost money, so there's that. There are incremental costs across the board. The SPC is going to be hiring some additional manpower as we start looking through the strategic plan for the rest of the year and the numbers of events that we have planned, not only for our pilots, but again on Wall Street and the public. We have a billboard that went up Thursday and we're going to have many more of those. There's going to be mobile billboards, so there is an incremental cost with incremental pressure.
Kurt Heidemann:
Speak to the pilots that may be critical of taking money out of the reserve fund. They said you already took money for dues. Why isn't that enough?
Casey Murray:
I'll expand on it, but very simply, it's a reserve fund. It is for this time. It is we've never gone this far. But then again, we've never been dealing with the operational challenges that we're dealing with or the management that we're dealing with. As such, this is exactly what the reserve fund is for. The board needed to understand not only the strategic plan you spoke of in 2019, but that gets built out on a basis where we start seeing dates filled in of pickets and strategic pickets, like the one we did when they announced the dividends. It was an opportunity, we guessed and guessed correctly that they were going to be the first to reinstitute dividends.
Kurt Heidemann:
Yeah, guess would be a little bit underselling it, I'd say.
Amy Robinson:
Yeah.
Kurt Heidemann:
We kind of knew.
Casey Murray:
Yeah. We kind of knew, and we also guessed, knew, there was a meltdown where all that money went away, but it's a reserve fund to make sure that our pilots are rewarded for what they've gone through. I've said it many times, this airline has become an airline that is supported by its employees instead of supporting its employees. Our pilots have carried, all frontline employees, have carried the brunt of that. They need to be rewarded with a contract that provides stability, allows Southwest to hire and grow and be strategic.
Amy Robinson:
Does that mean that they'll spend the full 7 million?
Casey Murray:
No, it is, we're releasing up to 7.1 million for negotiating efforts. I know Tom wrote on Friday about that, and so I won't get into a lot of detail about it, but this isn't about spending for other reasons. This is strictly to obtain a contract and everything that goes along with that.
Kurt Heidemann:
In the blast that we put out announcing the strike authorization vote results, we mentioned the money being spent for RLA in the final conclusion, we're reaching the final conclusion of the RLA. What do you mean or what did that mean specifically?
Casey Murray:
There are two definite endings to the RLA process. It's either self-help or it's an agreement, and it is to get us hopefully to an agreement. But there is the alternative and that's what we're preparing for.
Amy Robinson:
So I think the question I would have is, what do you expect from the membership now? What do you want them to do?
Casey Murray:
That's a great question, and there's going to be a lot more communication on opportunities for them to display their resolve. What I mean by that, and I want to be very clear, is taking part in strategic pickets, taking part in our social media because they are an integral part of the impressions that we make on social media. So we're going to be asking them to do very specific things not only on social media, but again showing up and I can't say it enough. What we have to do is stay focused on flying the airplane, be the safest pilots, the most productive pilots that we are. Matter of fact, I would make the suggestion that with what is coming this summer-
Amy Robinson:
What do you mean by what is coming this summer?
Casey Murray:
We got our SRC brief, our schedule research committee brief, and we've known, but now that they're looking at line building and the parameters and what is going to be awarded in June, and really the high-line values trying to create pilots to cover the flying that there's going to be challenges. So this is what I wanted to add is I would recommend, go out, fly as much as you can, build your war chest in case one of those two ends of the RLA process ends up with a not favorable one, which is not ending up with an agreement. So go out, take advantage of the amount of flying that's out there and build your war chest because everyone has to be comfortable with where we might end up. Again, I feel so strongly about this that it is up to us to make sure we don't get to a strike.
Kurt Heidemann:
I think we're asking you what our pilots can do, I think probably now is a really good time to mention we're still under the RLA, though, and this strike vote is not a strike and it's not a clearance to go do other things. Can you speak-
Casey Murray:
Yeah, there are things disallowed, and our pilots scream about status quo violations on the Company side. We see them either cross that line or skirt that line daily. I caution very strongly let SWAPA do the work. We're also very cognizant of what's being posted on social media and what pilots are texting one another. All of that doesn't help us. What helps us is doing what we ask. Let us drive the pressure and you continue to do what it is that you've always done, the most productive, safest pilots in the world and focus on safety because there's a lot of distractions that come with this, and we have to assure that we continue to do what we are known for.
Kurt Heidemann:
So Casey, you're talking about the June lines being dense and it getting really busy for us there and building our war chest. One thing that we did pick up from the board brief last week was SRC was talking about the potential for disruptions, not of our doing, but of the operation.
Casey Murray:
Well, Southwest has cut the margins, and I've talked about that a lot, but here again, we are with margins that are really, there are no margins. The number of flights scheduled with the number of pilot availability is really questionable. I know a lot of our pilots, they're going to move 510 pilots. They're going to move their CQT into June, which has caused a lot of consternation with our pilots moving into summer months from September and October-
Kurt Heidemann:
Sure, vacation, everything else.
Casey Murray:
Yeah, and now there's going to be a training backlog. That's 510 pilots that are going to be moved and are not available for that week of CQT. So again, they've reduced margins almost negatively, and I'm going to say it like I did in November. We're going to have a meltdown in June. What is going to cause it? Is it going to be that thunderstorm in Florida? Is it going to be another operational pause that is then unrecoverable because of the shortages and how they've chosen to schedule and how they've chosen to train? But it is going to happen.
Amy Robinson:
Now that we have the SAV information, do you expect to see a change in the company's attitude?
Casey Murray:
No, I don't, not speaking of the SAV in a vacuum, and I'll relate back just this year what's happened. We had the largest meltdown in aviation history, and I went to the next negotiating session, and they recoiled at even mentioning of that much less making any difference in how they approach negotiations. We've had the theft of profit sharing for all of employees cut in half. We've had the RSU grants to those that were responsible for the meltdown, and so there's a level of tone deafness, so I don't see a change. What will affect change is what I talked about earlier. We're going to apply pressure where their focus is, and unfortunately, their focus isn't on their customers and it's not on their employees. If Gary Kelly has proved anything over the last decade and the numbers and the billions of stock buybacks and the focus on stock price, the focus on Wall Street, then that's where we're going to go. We're going to spend a fair amount of time on that as well as public displays of unity.
Amy Robinson:
So one thing that we have talked about as well as attrition and some of those other things is stock buybacks, and we seem to hit on that pretty regularly. Why is that such a big deal?
Casey Murray:
Well, several reasons. Looking at the greatest meltdown in aviation history as well as the Columbus Day massacre, and some of those things really reflect on the lack of infrastructure, the operational drift of the operation. But let's look at just a couple of numbers here. In the 1990s, 14% of net income went to shareholder returns. In the 2000s, it was 58%.
Amy Robinson:
Oh, wow.
Casey Murray:
In the 2010s, during Gary Kelly's tenor and the focus on Wall Street, 109% went back to shareholders. So what that speaks to is two things, is the lack of reinvestment in the airline, in your employees, in infrastructure. But the second thing, let's look at Bed Bath & Beyond for a moment. So looking at shareholder returns in leading up to bankruptcy, they gave $11.5 billion back to shareholders. They went into bankruptcy and asked for bankruptcy protection for $11.5 billion. We have to learn from not only what Southwest's failures are, but the failures of the Blockbusters, the J.C. Penneys, and the Bed Bath & Beyond, they're cautionary tales.
Amy Robinson:
Thank you to Casey for taking the time to talk with us today. We know he's especially busy right now.
Kurt Heidemann:
As always, we'd like to hear from you. If you have any feedback for us at all, please drop us a line at [email protected].
Amy Robinson:
Finally, today's bonus number is $7.1 million. That's the amount of money the board authorized to bring us to the final conclusion of the RLA process. As Casey said, the path chosen will ultimately be up to Bob Jordan.