Southwest sues mechanics as flight cancellations mount
Southwest filed a lawsuit against its mechanics alleging that workers manufactured a safety crisis to gain an edge in contract negotiations, intensifying a battle between the airline and the union that has forced hundreds of cancelled flights at one of the nation's most dominant carriers.
Thursday's suit comes as rumors swirl that famed investor Warren Buffett may take over as the largest shareholder. Earlier this month, the Berkshire Hathaway CEO – who is currently the second-largest investor at the Dallas-based carrier -- said he was looking to make an “elephant-sized” purchase in 2019, but noted that prices remain too high. The firm also holds a stake in Delta Air Lines and United Airlines.
Buffett previously suggested he could own an entire airline at some point and speculation grew when a Twitter account posted unconfirmed intel that he was negotiating to purchase Southwest's remaining stock at $75 a share. It sent Southwest shares up over 4 percent on Thursday.
In a statement, the company said it does not comment on rumors but appreciates “Berkshire’s continued support."
As Southwest ramps up its attacks against the Aircraft Mechanics Fraternal Association (AMFA), flights cancellations are piling up with no immediate end in sight after the carrier declared an “operational emergency” last week due to an increased number of out-of-service jets.
On Thursday, the Dallas-based carrier canceled 108 flights, according to tracking website FlightAware. That follows 168 cancellations on Wednesday, 158 on Tuesday, 147 on Monday and roughly 193 on Sunday.
In its lawsuit, Southwest alleged the rising amount of out-of-service aircraft is due to "cosmetic" issues with its planes flagged by mechanics that have no impact on their performance and charged that it is a coordinated and illegal effort by the union.
“We continue to work very diligently in the background to try to mitigate the impact on our customers,” a spokesman told Fox Business.
When asked whether daily cancellations would continue at their current level, the spokesman said, “We hope not.” He declined to say whether the disruptions are impacting future flight schedules or ticket sales.
Despite the interruptions, analysts remain bullish on the corporation.
"Southwest Airlines is held in such high regard by its passengers and the industry that the market usually will forgvie an occasional misstep," Ivan Feinseth, chief investment officer at Tigress Financial Partners, told Fox Business.
Southwest operates roughly 4,000 flights a day during the week, so the cancellations to-date represent a small percentage of its overall travel volume. That number goes down on the weekends to 3,000, giving mechanics time to catch up on servicing aircraft. And because it does not operate overnight flights, Southwest is also able to address the backlog in the evenings.
On top of the maintenance issues, some of the interruptions are also due to inclement weather that impacted other airlines as well. But Southwest has canceled more flights over the past week than any other major U.S. carriers after the number of daily out-of-service planes doubled.
In a statement last week, Chief Operating Officer Mike Van de Ven blamed the uptick on the AMFA – a group he said has “a history of work disruptions.”
“Southwest has two pending lawsuits against the union. We will be investigating this current disruption and exploring all possible remedies,” he said in a statement last week.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| LUV | SOUTHWEST AIRLINES CO. | 27.03 | -0.23 | -0.83% |
The airline has been engaged in negotiations with AMFA on a new labor contract for more than six years. A spokesman said the company is “committed to making sure there is a deal that reflects what Southwest has always done, which is industry-leading compensation.”
The union – which voted against a prior offer because it did not include a 16.7 percent pay increase -- previously raised questions of why the airline declared an “operational emergency” during this incident, but did not previously when a passenger was killed on a flight due to engine failure.
And in a letter sent in February, the AMFA warned against any collective action among members to stop working.
“You, as a federally licensed Aircraft Maintenance Technician, have an obligation to ensure aircraft upon which you work only carry passengers in an airworthy condition,” national director Bret Oestreich wrote. “There is no hidden message here about this – job actions do not help you, your co-workers, or the union.”
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Outside the dispute with its mechanics, Southwest is in the midst of a Federal Aviation Administration investigation over how it calculates baggage weight on flights.
The carrier also recently said the 35-day government shutdown would cost it $60 million in the first quarter of 2019. No further financial disclosures are expected before it reports earnings in April.