17.A.2 (VPTO, Jody Reven, Greg Auld, Erich Schnitzler, Scott Plyler)

Today's SWAPA Number is 17.A.2. That's the section of our new CBA that deals with VPTO, or Voluntary Paid Time Off. 

On this special episode of The SWAPA Number, we are welcoming NC Chair Jody Reven, EFA Committee Chair Erich Schnitzler, Committee Member Greg Auld, and Scheduling Research Committee Chair, Scott Plyler, to discuss a voluntary paid time off program being offered to the membership by Southwest Airlines.

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Transcript

Mike Panebianco: 0:03

Today's SWAPA Number is 17 Alpha 2. That's the section of our new CBA that deals with our topic today, which is VPTO, or Voluntary Paid Time Off.

Matt McCants: 0:15

On this special episode of The SWAPA Number, we are welcoming NC Chair Jody Reven, EFA Committee Chair Erich Schnitzler, Committee Member Greg Auld, And Scheduling Research Committee Chair, Scott Plyler, to discuss a voluntary paid time off program being offered to the membership by Southwest Airlines.

intro: 0:34

Southwest 569, runway 15R, cleared for takeoff. Cleared for takeoff, 15R, Southwest 569.

Mike Panebianco: 0:46

I'm SWAPA Communications committee chair, Mike Panebianco.

Matt McCants: 0:50

I'm SWAPA Communications committee member, Matt McCants, and here's our interview with Jody, Erich, Greg, and Scott. All right. So to start the conversation, let's hear from some familiar voices from the podcast on the first quarter earnings report a couple of weeks ago, if a committee chair, Erich Schnitzler and committee member, Greg Auld. Gents, when we had you on the podcast, following that earnings call, we discussed the disappointing results of the first quarter, but we looked ahead to a second quarter rebound, and we're also coming off this unprecedented number of pilots hired in the last couple of years. And now we're back here talking about VPTO or. voluntary pay time off. What's the story here? How did Southwest Airlines find itself here?

Erich Schnitzler: 1:30

Well, I think first we can look at a fleet delivery schedule has certainly changed at the beginning of the year. We are expecting, you know, 79 MAX-8s. Now we're down to 20. I think we're all familiar with the Boeing issues with delivery and certainly in certification of the dash seven, as we talked about a few weeks ago. I think it's definitely the delivery. It's also network optimization. Greg, do you want to speak to that a little bit?

Greg Auld: 1:55

Yeah. I mean, we've talked about network optimization before Scott's mentioned that on the SRC podcast, you know, less flying on Tuesdays and Wednesdays, you know, shoulder cut flying and things like that. So all this rolls into the idea of trying to find ways to get more money out of the network we have. And at the same time dealing with a smaller fleet count, we ended last year with 817 aircraft. We're going to end this year with 802. And if we continue to retire the 700s at the rate at which we probably need to to avoid those expensive maintenance costs, we'll probably have even fewer airplanes in the first part of 2025. So that is really driving the reduced number of airplanes and the changes to the network is what's driving this overstaffing that we'll get into a little bit more later.

Erich Schnitzler: 2:38

Yeah, I think one of our issues is the aircraft, uh, the Max 8 or the, uh, the 800 are just too big to profitably serve some of our markets. You know, that plays into it as well.

Matt McCants: 2:49

Now you touched on a little bit of this on the personnel side. Why is the company asking for VPTO specifically? What part does that play in that?

Greg Auld: 2:56

Well, this is a little bit of a reboot of what we saw during the COVID times when the company had a couple of different pay time off programs. Really, they had three. They had ETO, which was emergency time off. They had extended time off and then they had a volunteer separation plan. So at the end of the day, VPTO looking like those programs is a simple cost savings play. What they're trying to do is take the LG bars that will be paid across an overman product group and then move some of that LG pay into some volunteers that would like to have essentially a month off with no flying at a reduced pay rate.

Mike Panebianco: 3:30

Jody, before we get into the details of the program, question that some of our pilots are going to ask is why are we solving Bob's problem for him?

Jody Reven: 3:37

A short answer is we can't, we can't solve Bob's problems, the revenue problems, uh, the Boeing, you know, uh, delivery problems, et cetera, nor, uh, is it our desire to, and that'd be a poor way to characterize this. The company can already offer a VSP with or without swap as agreement. They can, they can offer early retirements. What they can't do because of a specific language we negotiated in contract 2020 is they can't roll out a paid leave program. Without our agreement. And so naturally we're the governing body they come to, and this is purely a cost savings play to them. Possibly it's a win win for the pilots. The NC, I would say is agnostic as to whether or not the membership or the board of directors entertains this, but you know, our job to bring it to the board and to start the discussion.

Matt McCants: 4:26

Okay, so the company is offering the pilots a VPTO program. Do we know if any other work group is being offered something like this, or is there any other cost savings play that they're looking to deal?

Jody Reven: 4:37

We actually asked that specific question when the company brought this to us at one of the joint implementation committee meetings. And it was a question that our board, one of our board members had. So I asked the question and they said, uh, you know, outright, no, uh, this is not something that, you know, the flight attendants have different provisions in their contract, like job sharing and no bid lines, et cetera, where they don't envision offering this at all. Uh, then the others, you know, you saw some station closures and some, some things like that where people are either repurposed or moved on. So short answer is no.

Mike Panebianco: 5:09

Is the discussion of VPTO a prelude to a furlough discussion?

Jody Reven: 5:14

No, no, there's, there's two places in the contract. And I think that's important to, and we, we ask, you know, which, which provision are you invoking, you know, to start this discussion about a paid time off. And one of them, uh, the main one, the one this one's about is just section 17, the leaves of absence itself. Uh, and this swap has to approve any paid leaves of absence. And then of course, there's obviously the furlough mitigation section, and this is not that, but this is not that discussion. This is not a take this or else ultimatum, anything like that. And then, uh, we can get into the math later of why that just doesn't make sense, but no.

Matt McCants: 5:51

Okay, guys, so we touched on this being a little bit of a cost savings play. What do we approximate those net savings to Southwest Airlines if we accept this?

Scott Plyler: 5:59

Well, SWAPA has some projections just based off of company data of how many they're looking to possibly do. It's anywhere between 5 and 10 million a month between lower LG bars and less than reserve guarantee for having excess reserves. That's a little bit more than what the company has projected. Again, we don't have the actual data on the schedules just yet, but It just depends on how many pilots they're offering it to each month. It looks like it would be higher in September and October and then a little bit lower in December when the schedule is a little bit more robust, but still not up to what we're going to see this summer.

Greg Auld: 6:34

I guess we can use a little bit of history to guide the discussion as well, too. If I look back to the ETO program, the Emergency Time Off program we had in the summer of 2020, it ran from May 2020. And it's last month was May of 2021. Now that was at a little bit reduced amount. If you, the pilots that were here, remember that was at one half of line guarantee. So that the payment was somewhere between, you know, 43 and a half, uh, 44 and a half, uh, TFP a month. This one's a little bit richer at 55. But if we just look back at the experience we had in those months. We saved over those 13 months, we saved about 56 million was really highly subscribed the very first month, about 821 pilots took it. It, it, uh, it petered off till there was less demand after EXTO, uh, came into, into effect beginning in the fourth quarter of that year, but we saw several million dollars a month, like Scott alluded to, uh, in the ETO program. And if we had similar take rates in this, in the VPTO, we should expect a similar result.

Mike Panebianco: 7:35

Before we go down the road of. The nuts and bolts of how the, the program is going to work. Uh, I'd like to point the membership towards the contract and what in contract 2020, where is the language that brings together leaves of absence like VPTO? So that's

Jody Reven: 7:51

a section 17. So we've got the leaves of absence, a 1782 specifically. It says those specifically defined in this section, section 18 and section 22, and those required by law, a paid lease may only be offered by the company with mutual agreement between the company and the association. So this is the language that was hard fought as a result of our EXTO disagreements. And historically, you know, we were pretty close on an agreement for EXTO and then the company went ahead and rolled it out anyway. There's another section, of course, obviously the furlough mitigation, uh, that is not what the company is invoking or what we referenced. That would be 22.C.1.

Matt McCants: 8:29

Now, let's get into the details for a discussion for all the pilots. What is VPTO for the newer pilots and how is it different from ETO of the COVID era?

Scott Plyler: 8:38

What the company is currently offered was a VPTO paying 55 TFP per month. They're looking at anywhere between, you know, 600 and 1200 pilots, depending on the month, it's up to us really, whether it's seniority based or not, but that was the initial thought because everything else in our contract goes by that they would like to have some ability to change it by base, just to take into account vacancies, changing where the flying actually going seasonality and even offer it by differences in the different seats, looking at vacations, things like that. They're looking to do these one month at a time. The company's initial proposal was to alternate months so that pilots don't go non current, so you wouldn't be able to take it back to back, and also just to kind of spread the wealth out, so to speak, to more pilots to be able to take advantage of the opportunity.

Jody Reven: 9:36

Yeah, I think that that's one of those where it could be seen objectively. This, that is one of those pro con type things. And the company is doing it purely for the lessons learned and the impacts and problems they had when they had too many people out on Xdo and then they received a training backlog, et cetera. And so they're trying to make an offer that allows them to keep everybody current in the event that the deliveries start taking place and we have something for those pilots to do.

Matt McCants: 10:04

Okay, so what I'm hearing is there will be some kind of attempt to make this fairly evenly spread, but we might not see it being even numbers by seat or by base. Will they be back to back leaves? And I think something else the pilots will want to know is if you're on VPTO, how are medical and jump seat and other benefits going to work?

Greg Auld: 10:24

Yeah, I think Scott covered the initial proposal regarding the back to back, so right now the plan is not to have consecutive month VPTOs awarded, all that's subject to negotiations. But to talk about a couple of the other things that will be a part of the player in this program, there's a 55 TFP, you'll still keep the standard retirement accruals, the NEC and the market based cash balance plan. Every pilot on VPTO will still maintain active status for all things active status, like medical, disability, life insurance, travel, jump seat, expenses. None of that has changed. Essentially, you just have 55 TFP and no flying on your board. Longevity, step raises will still be in effect. Sick and vacation accruals will all be unchanged.

Matt McCants: 11:07

Okay, so we'll have final numbers on just how many pilots in what seats and what base as we progress through the negotiations here.

Jody Reven: 11:14

So I think it's a scheduling dependent and as a network plan comes out and the number of tickets, uh, So the company's trying to tailor this program so that they don't have displacements so that they don't trigger unwanted upgrades so that there's as least impact to pilots involuntarily and they can still cover the schedule. So that's the initial proposal. Other things that we needed to clear up from EXTO, we made sure that, you know, we will make sure if, if we decide to go down this path that, you know, military pilots aren't excluded. Uh, cause some of those guys were denied, I guess, during their military leaves, uh, and the company's already agreed that won't take place. They want to work another flying job while out on VPTO. Well, if it was ever the month that that might start to become a challenge, but that is something the company is open to. And then of course, either party has the ability to pull out of this with 90 days notice. And that's just purely mechanical for the vacancy.

Scott Plyler: 12:09

So the way they had envisioned this working is that you would bid for your VPTO month prior to the vacancy for the month. That way they could determine how many folks they could actually afford to do it without causing problems with their vacancy. Then they would run the vacancy and then we would bid the lines. You would be bidding for this a little over a month and a half out from the month of VPTO. And just a couple caveats on that were they didn't want anybody to go non current and they also didn't want anybody to go outside of their grace month and go non current. So you wouldn't be able to take this in a grace month for your training. But the other caveat, you know, probably not that big of a thing with less and less upgrade classes towards the end of the year. But if you actually bid for a vacancy where you required going to captain upgrade, they could pull your VPTO there. But again, that'd be something under the pilot's control. If you're going on VPTO, don't bid to go to the captain seat.

Greg Auld: 13:08

So the other thing to mention is we spoke earlier in this podcast about how the plan as proposed would be awarded by base and seat and not system wide seniority. And the thinking there from the company's standpoint is to avoid unnecessary displacements. So if you had a large number of takers in one base, that could force some unnecessary displacements across the system. So that's the thinking right now, why it would be base and seat.

Mike Panebianco: 13:32

So, Scott, for the pilots that are planning to stay and fly the line and those that may not bid for VPTO, will there be line guarantee if it passes?

Scott Plyler: 13:41

Obviously, they're doing this to save on line guarantee and based on projected numbers of how many they might want to offer at least through the end of this year, it's looking like that line guarantee, depending on the month would be between 5, 9, maybe 10 TFP worth of LG if they don't do this program, if they were fully implemented, you probably wouldn't see much of an LG bar, they wouldn't want to go much more over that, you know, otherwise, they're just They're paying out people to be on VPTO and not getting any savings on the line side. So, knowing that there's 5 to 10 TFP worth of LG to work with here, when you start looking at, if they didn't do VPTO, we'd probably see maybe a day less in the bid lines to go along with An LG bar of five to ten. So if we actually do a VPTO program and they build it out fully, you'd probably see little change in the work days from what you're seeing here in April and May. Not quite what you'd see in June and July because they did bump up the schedule a little bit, but you'd probably see approximately 13 days on average, give or take a little bit. We've been working on providing more of a distribution there, but That's based on a fully implemented VPTO. You probably have about 13 days lines with very little LG.

Matt McCants: 15:01

Okay, Scott. So if I'm hearing this correctly about 13 days on average working during this VPTO period and just a little bit of contraction what the the line guarantee bar would look like

Scott Plyler: 15:13

That's correct, but you've probably seen most of the LG get absorbed, you know, by having an additional Flying in the lines that would have been going to VPTO pilots

Mike Panebianco: 15:23

So Scott will the line quality and pairing quality be better with or without VPTO?

Scott Plyler: 15:30

If we have a VPTO program, you would see probably more of what we're doing today, where with a 13 day line, if you have all three days, you're probably going to need an extra turn added on. If you didn't have VPTO, there would be that extra line guarantee, but we would have more pilots to spread the flying out to, so you might have just 12 day lines. Without having to add that extra day on one of the weeks, anytime you have line guarantee with or without VPTO, but when you do have line guarantee, there is an opportunity to do some more things like do commutable pairings, which tend to be a little more rigged or do more turns in two days. Again, things that might cost some more rigs, but when the rigs are just replacing LG, the company is a little more apt to do them. So, without VPTO, we might have some opportunity to do more of that. But when you do those things, they also add to the number of workdays as well. So it kind of becomes a balance. We might be able to have slightly better schedules, but you might not see quite the reduction in the workdays even without VPTO. But even if we did VPTO, the lines themselves probably wouldn't be a whole lot different again than what you saw in April and May.

Matt McCants: 16:41

Okay, so let's blend in a little bit what the company spoke to a few weeks ago with this higher aircraft utilization, the aircraft being utilized for longer hours over the course of the day as they manually redo these schedules. Can you speak to how the duty days will be impacted for those not awarded VPTO should we take it versus the green bar lines?

Scott Plyler: 17:00

Well, the shoulder flying is mostly here for the June and July time frame, the aircraft utilization drops, uh, is projected to drop quite a bit come August and stay that way pretty much through the end of the year with a couple spikes at Thanksgiving and Christmas. Overall, the we're going to drop from, you know, using aircraft, oh, you know, 12 and a half hours a day down to 11 to 11 and a half hours a day. So what you will see, you will see less of that shoulder flying the early a. m. starts and the really late p. m. arrivals. You'll see less of that, which actually can help out with, uh, with the pairing quality as well, because those aircraft lines, you know, what an aircraft does during the day can actually be covered by just two pilots and you don't have to change aircraft at all. So just by the nature of the network being reflowed, we might actually have some better quality pairings even without the VPTO come August.

Mike Panebianco: 17:59

So Jody, I know one of the questions that's going to pop up and some of our pilots are getting towards age 60 and maybe had some regret about not taking VSP. Is VSP on the table? Is that something the company has discussed?

Jody Reven: 18:12

Oh, no, it's we've asked that question, Mike. It's a good question. Fortunately, or unfortunately, however, you want to look at it, the company doesn't need swap is permission to offer VSP. You know, it's they can always offer early retirements, which is what we're talking about, what they cannot offer what they do have to ask us is, you know, any type of paid leave program. So not a lot of leverage for us to demand something like that. I mean, the shortage is still a real thing. And the company has every reason, uh, to keep those pilots if they do believe that we are going to return to the 4,000 plus, uh, flight a day schedule when deliveries start to take place. Also, you know, we've been told that there's some buyer's remorse, uh, about the VSP and how widely it was used. Uh, if you remember back, we actually recommended to the company that they take a targeted approach and say, you know, kind of like American did with, you know, their different fleet types and say, Hey, I'm only going to let so many people go. Otherwise, I'm just going to start up a bunch of training costs and displacements, etc. The company to quote one of their negotiators said, I, we're going to swing for the fences. Well, as a result of that swinging for the fences, a lot of people took that program. In fact, they still owe 64 million, uh, from the last one. And if you remember when the last one took place, there was PSP money, uh, coming in to help, uh, augment that. So, uh, the company has said, uh, and we did ask the question that, uh, at this time, there is no appetite at the C suite for another VSP.

Erich Schnitzler: 19:44

Another thing to consider, uh, when looking at VSP is, is the experience at UPS. Uh, they offered an early retirement not too long ago, got upwards of 200 people to take the early retirement, and then just a couple months later, they received the, uh, USPS, the United States Postal Service contract from FedEx, and now they have to hire those 200 plus more back. 250 to 300 is what they're looking at hiring. And that, uh, kind of negates. The early out that they had offered literally just six months before, you know, this may be that exact situation here You know if the economy picks up our network re optimization plan Bears fruit if our delivery schedule gets fixed and we may be in the same situation, you know Six months now an election change in november any number of these Things could, uh, could change the, uh, the overall situation for us, uh, where we find ourselves in the same type of, uh, situation as UPS needing to, uh, hire quickly again.

Matt McCants: 20:44

I think another big question the membership will want answered is, will the membership get to weigh in on this? Will there be polling of some kind for the membership to engage with the issue?

Jody Reven: 20:54

Uh, that's an excellent question. As far as a, a vote, obviously this is something that could be decided at the board level only because it's a temporary program. If the company wanted to make this a change, uh, you know, a change in a reduction of work rule minimum permanently, then that, that would rise to the level of a side letter. We do, however, and the board is sensitive to making sure that, you know, they're doing what their membership wants. So, you know, in the coming days and weeks, we'll be putting out a survey that talks specifically about this and the appetite for it, you know, and the opposition or appetite, whichever it may be. As I said, you know, we're agnostic on the program itself.

Mike Panebianco: 21:33

So finally, any pro con points that you'd like to make that we may have missed in our questioning to help the members educate themselves in the decision process?

Jody Reven: 21:42

Well, sure. I'll start off with that. And I think Scott has some, some really, uh, some more pointed things about the, uh, contract 2020 work rules that can help work with this, but, but first of all, it's, it's a hundred percent voluntary. Uh as a pro side the con side is that there could be this perception of oh, well my seniority couldn't hold it or It happened right during my grace month, so I didn't get to take advantage or I would like to do it two and three months at a time So so I think it's one man's trash is another man's treasure. So I think the board understands the importance of uh asking the question and then the final thing I would say is that You know if we decide to dip our toe in this and take the 55 TFP and the time off You If the swapper doesn't like it, if the membership doesn't like it, if the board doesn't like it, they can always withdraw from it, uh, with either party within 90 days notice.

Scott Plyler: 22:30

We've kind of got three sets of pilots here with certainly there's the ones that are interested in taking VPTO. That's a, that's a nice thing 55 TFP or whatever it gets agreed to, to have your month off to do something else. Then you have the pilots who just fly their line. Yeah, and don't really do a whole lot. Don't pick up a whole lot. They might be working the same amount as they are today. We will have a little bit of line guaranteed to play with even so, and we might be able to make some better lines out and pairings out of it with more of the attributes that we want, the commutables, the, the turns in two days, but that does come at a cost of not having as big of an LG bar. And then we also have the pilots who do like to pick up quite a bit and work a lot more than the regular line. Well, when you have less pilots out on the line doing the flying, there's more opportunity to pick up open time. There's probably more things that fall into ELITT and to be able to move things around. So it could possibly be good for the pilots that rely on extra TFP. So. There's a little bit of something here for everybody. It's not really, it's not completely equal for everyone, but that's why we're pulling the membership on this.

Jody Reven: 23:41

Yeah, it's very true. And I would also add, I don't think we, any of us want to have the company to have the ability to always man the airline to the peaks and then just throw this program out any month that they think it's going to be down. And that's why I think it's important that we make it a temporary program that either party, uh, you know, that can withdraw from. And if it's something like pilot group has an appetite for now, then we'll put it to the board for a vote. And if it's not, it's not.

Matt McCants: 24:13

We'd like to thank Jody, Erich, Greg, and Scott for taking the time to sit down with us and discuss VPTO today. As always, if you have any topics that you'd like to hear about on The SWAPA Number, drop us a line at comm@swapa.org.

Mike Panebianco: 24:25

Finally, the SWAPA bonus number today is 7. That's the number of days polling will be open for pilots to weigh in on VPTO. And that polling opens this Friday, May 17th.

outro: 24:35

Thank you so much.