Military

Will Southwest Pilots Go on Strike?

737 MAX 8 artwork SWA Southwest Airlines
courtesy Boeing Co.
Pilots for Southwest Airlines Co. (NYSE: LUV) announced on Tuesday that they have formed a “Strike Preparedness Committee” in the event that talks between the Southwest Airlines Pilots’ Association (SWAPA) and the airline fail to reach a new contract agreement. SWAPA represents more than 8,000 Southwest pilots.

The current contract between Southwest and its pilots was signed in 2006 and ran for six years through August of 2012, according to the Southwest website. The two sides have been in negotiations for more than three years, the union said, and have been holding federally mediated discussions related to pay, retirement, scheduling and job scope since November 2014.

Under the Railway Labor Act, unions may not strike unless the National Mediation Board rules that talks are stalemated. At that point arbitration is offered, and if either side rejects an arbitrator, a 30-day cooling off period is begun. If there is still no settlement, the union may seek what is known as “self-help.” If the self-help point is reached, Southwest could initiate a lock-out of the pilots or the pilots could go on strike.

SWAPA’s president said:

Despite astronomical profits and record-setting forecasts for the coming years, Southwest Airlines management has not come forward with an economic offer that can bring both sides to an agreement. Our offer is very affordable and would not impact the company’s competitive low-cost advantage. It is time for a deal.

After comparatively modest share price increases from 2009 to 2013, airline stocks have been mostly on a tear. Southwest’s stock price has jumped about 315% since January of 2013, the most of any major U.S. carrier. Delta Air Lines Co. (NYSE: DAL) has posted a 300% share price gain in the same period, and JetBlue Airways Corp. (NASDAQ: JBLU) has seen its shares appreciate by nearly 290%.

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Southwest Airlines issued a statement Wednesday morning saying that it is aware of SWAPA’s formation of a strike committee and that none of the airline’s customers has any reason “to change or be concerned about their travel plans.”

Southwest’s annual stockholders’ meeting convenes Wednesday in Houston, so the timing of the SWAPA announcement is not a coincidence.

Southwest’s stock traded up about 1.3% just after Wednesday’s opening bell, at $42.82 in a 52-week range of $24.41 to $47.17. The consensus price target on the stock is $55.27, and the high price target is $66.00.

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