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Southwest Reaction Summary

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Southwest Airlines Reaction Summary | HR 5804 | William B Bain tuf51491@temple.edu11/27/2014 |

Reaction Summary
Generally speaking, it’s difficult to imagine that Southwest will maintain its position as the darling of the airline industry. For many years the company was blessed with a product nobody else had, operational economies that rivals envied, and financial results that empowered the company do things their way. But now, industry changes and Southwest's maturation have introduced many issues the company never had to deal with, creating pressure to change the way the company manages its business. Thus I am not optimistic that Southwest’s level of performance is sustainable.
The principal reason for my pessimism is Southwest’s relative position within the industry on costs has changed. Southwest's biggest challenge involves its 45,000 workers, who long have enjoyed unparalleled job stability and compensation. About 83% of its workers are unionized, and the company is currently in negotiations with nearly all of them on new contracts—some of which seek to freeze pay scales. Its cost to fly per seat, per mile has risen steadily over the last decade, placing pressure on the company to modify labor contracts to reflect the current reality. Historically free from labor-related strife, existing contracts ]were designed for a smaller, short-haul airline that didn't fly late at night or adjust service levels according to demand.
In prior contracts, workers generally received raises. The Southwest of today is asking for some of the biggest contract changes ever from employees in a bid to contain costs. Southwest wants to tighten rules on sick time and largely hold compensation flat. It’s seeking savings from increased productivity and more flexibility in workers' contracts. It also ultimately wants 40% to be part-time, meaning their families would have to pay

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