Section 1 | Contract 2029 SEP Education

Welcome to your Contract 2029 SEP Education series. In this first episode, Negotiating Committee Chair Kurt Heidemann will go over all areas of Section one for our Pilots.

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Transcript

Amy Robinson:

Welcome to your contract 2029 SEP Education series. In this first episode, Negotiating Committee Chair Kurt Heidemann will go over all areas of Section one for our Pilots.

First of all, what is section one?

Kurt Heidemann:

Section one is the purpose of the agreement. That's the first section in the CBA and it covers a lot of things that are really the most important part of the contract. It's really a foundation of it.

Amy Robinson:

So then what is scope?

Kurt Heidemann:

So scope is actually inside of section one. It's 1A. And scope is what defines what flying is accomplished under the scope of our contract and basically the scope of the flying that pilots perform for the Company.

Amy Robinson:

So how do SWAPA's section one protections compare to other carriers?

Kurt Heidemann:

Honestly, they compare very well. We have very strong scope language. And when we get later onto the discussion, you'll see that we have very strong airline partnership language. But basically the short version is any flying done for the Company must be flown by SWAPA pilots. So they can't outsource, they can't co-share, they can't go to regional jets or other partners unless it's explicitly included in our contract.

Amy Robinson:

Why would you say that's important?

Kurt Heidemann:

Well, scope defines the scope of work. Without it there's a history in the industry of other airlines outsourcing work. And they're doing that because of cheaper labor or work rules or other reasons that are harmful to our pilots' careers.

Amy Robinson:

So what is allowed in our section one protections?

Kurt Heidemann:

What is allowed is airline partnerships in very limited capacity. We allow both interline and code share agreements with restrictions. And I'm sure we'll get into that a little bit later.

Amy Robinson:

Are there any partnerships that are excluded?

Kurt Heidemann:

Yes. Flag of convenience carriers are flat out excluded clearly in the language. And then state-owned enterprises, which used to be a bigger thing as far as being a threat to the industry or a threat to unfair competition, are prohibited unless agreed to by the association.

And as part of reaching an agreement on contract 2020, we also agreed to a list of state-owned enterprise exclusions, SOE exclusions list of about 20 carriers. That information is proprietary to the Company for commercial reasons. So it's not public, but it's available on the SWAPA website.

So the Company has a list of about 20 state-owned enterprise carriers that they can co-chair and interline with. And then if there are others that come about, they can come to SWAPA and with the approval of the board of directors enter into agreements with them.

Amy Robinson:

So what is the difference between Interline and codeshare? This comes up a lot.

Kurt Heidemann:

It does. Interline is really the most basic partnership. And it basically is a seamless travel for a passenger to take their bags on a single ticket and you can check in on one carrier and the bags will transfer over and you'll connect with another carrier out the other side. And you don't have to collect your bags, walk over to the other ticket counter and check them. So that's a basic Interline.

Codeshare is a deeper integration of the partnership that allows the marketing carrier to put their code, in our case WN, on the partnership flight that would allow a flight that says Southwest. That would go from say Little Rock all the way to Brussels even if one or two of the legs are on a partner carrier like Icelandair.

Amy Robinson:

So something that comes up a lot when we talk about codeshare and Interline is PDEW, where Passengers Daily Each Way. Can you explain that and how it applies to both and codeshare?

Kurt Heidemann:

Sure. Passengers Daily Each Way is exactly what it says. It's a passenger count going both directions on a daily basis. And so, when we talk about Passengers Daily Each Way, PDEWs, for both Interline and codeshare, it doesn't matter what type of partnership it is, those are additive PDEWs.

So if we have an agreement that's a codeshare that goes to Europe and we have an agreement that's an Interline that goes to Europe, both of those partnerships, the total PDEWs are counted together. So for our pilots purposes or for contract compliance, it's less important. It's more important when we are negotiating them and achieving a value capture for them.

Amy Robinson:

Okay. So let's talk about near international and far international. Let's start with that. Let's do near international first. Give the listeners an explanation of near international

Kurt Heidemann:

First, the important thing to remember about near International is when we negotiated it, it was with the idea that we are able to serve that market. So we are very protective of that kind of flying. So there's more limitations, more restrictions on the near international flying than there is on far international, just conceptually.

So with near International, the first thing you do is you have to look at the size of the market and if it's under 900 PDEWs, then that's the first trigger. And that says, yes, they can initiate an airline partnership to that market. And since it's near international, it can only be Interline. They're not allowed to codeshare.

So it's only an interline airline partnership if it's below 900. If it's above 900, then the answer is, "No, you can't. We have to serve that market with our airplanes." So let's say it's below 900. Then the next step is they begin a partnership and now we switch from measuring the total PDEWs of 900 down to the Southwest PDEWs, meaning the ones that connect on our partners to our metal. And if that number exceeds 75, that's the limitation and that's on a per market basis. So no more than 75 customers can connect through various flights on a daily basis to the United States before we hit that limit.

Amy Robinson:

Are there any other restrictions to near International?

Kurt Heidemann:

A couple. The most important one, again, we have to fly the trans-border leg. So in the event that we have a partnership, if the partner connects in Panama City, if it's Copa, we partner with them. Copa cannot fly from Panama City to LAX. Southwest has to do that leg. Copa can go down to Buenos Aires, pick them up and bring them to Panama. But then on that leg, if it's an interline itinerary, we fly that leg from Panama up.

The other thing, that 75 PDEW limit for the Southwest limit, if it triggers, then we have some language in there that says, "If it goes over 75 within the previous six months, then within 12 months the Company has to start service to that city." So if there's a small city like Barranquilla and we get up to 80 Passengers Daily Each Way, then now we're filling up half an airplane. So now we're saying to them, "You need to put Southwest metal on." And by putting Southwest Metal on, that will necessarily lower the number of connecting passengers because carrying one of those on a daily basis or semi-daily basis.

The other thing we can do is within 12 months you can reduce the volume of interlining below the PDEW threshold. And they do that through either not selling as many itineraries or raising prices and lowering demand. So they have levers that they can pull to make that work.

And then the third thing that they can do is within 60 days get the association's agreement to continue interlining to that foreign destination. So they could come to us and ask for relief and that would be a vote of the SWAPA BOD.

Amy Robinson:

Okay. So we've talked a lot about near international. Let's cover far international next.

Kurt Heidemann:

Okay.

Amy Robinson:

I know those limits are a little bit different, but first talk a little bit about the differentiation between the Atlantic region and the Pacific region.

Kurt Heidemann:

Okay, so that's the key difference is with the near international, it's by market. So it's a city by city measurement. When you go to far international, to your point it's the regions. It's the Atlantic region which has a limit of 375. And that's for all destinations to the US and that includes Europe, Africa, and the Middle East.

And then the Pacific side is 875 PDEW and that's basically all of Asia and Australia. And so, those are total counts. So think of it another way. The Pacific is about five 737's worth of flying on a daily basis. The Atlantic is about two and a half airplanes worth of flying on a daily basis is the limit of the relief that we offer in a contract.

Amy Robinson:

And are the remedies for fixing them exactly the same as the near international or are they different?

Kurt Heidemann:

They're not exactly the same. They're very similar. They have the same concept, either reduce service, stop service, get relief. And then the fourth one that's a little different is initiate service to that region using Southwest Aircraft. So they have that option and that's what we want. We want them to grow the airline, we want them to serve other destinations with our metal, with our pilots. So that's really the one that is most desirable I think for both parties.

Amy Robinson:

Before we get to re-opener, are there any other allowances that we did not cover thus far?

Kurt Heidemann:

Yeah, there's a couple other little carve outs that are worth mentioning because like we said, it has to be clearly spelled out, otherwise it's prohibited. And so there are a couple other things that the Company is allowed to do that's worth mentioning. They are allowed to do some codeshare in the Caribbean, in inter-island Hawaii and intrastate Alaska. And basically, remember, those are going to be type of flying that we aren't going to be able to support 737, you're not going to be flying in a lot of these little places.

That said, even though they could codeshare in a place like Hawaii, they have chosen not to because it's not economically viable or feasible. Now, maybe they would want to down in the Caribbean if they're going to St. Barts or something that only has a little runway that an ATR or somebody can work in on. But in general, that's about the limit there.

The other thing we have is we have limited cargo in our line and we also have an allowance for irregular operations. And the Company can take our passengers in the event of a scheduled disruption, a cancellation, and get them on our competitor's aircraft. Basically it's a customer improvement process, a customer experience. They're not making money on it, but it's just handling our passengers in cases when we can't.

And I want to point out that is a reciprocal agreement. So we are receiving the passengers from American Delta, United just as we would give them off. It's mutually beneficial to both airlines. It's to take care of customers that are impacted by scheduled disruptions.

Amy Robinson:

You mentioned a little bit earlier re-opener language. Talk a little bit about that.

Kurt Heidemann:

That's section 1M. and it's a really important part of the contract because there are a lot of things that we could really get bogged down in the details of things when the Company just doesn't know what the future looks like. A good example is we have a re-opener should the Company buy another aircraft besides the 737.

It could be anything from an RJ all the way up to a wide body or anything in between. And for us to try and spell out rules in today's contract would've taken another three years of negotiations. So instead we just said, "Hey, if you decide to buy an airplane that isn't a 737, it reopens the contract."

And so we have other provisions in there that protect our interests such as we had a good argument about the MAX, whether it was a 737 or not, the MAX [inaudible 00:11:49] and all that nonsense. You can fly any version of the 737 up to 175 seats. But beyond that, now you're really adding to the productivity of pilots without paying them for their added productivity.

The one on top of most people's minds right now is probably begin international routes other than near international routes. And so that's the topic that came up about two months ago. the Company came to us and wants to discuss flying outside of near international. They've made it clear it's not with any new airplane, but it still triggers our 1M language. So we've entered into negotiations to see if we can reach an agreement on that.

Our best protection there is that the Company cannot put this into effect. They cannot fly to far international until they have prior agreement of the association.

Amy Robinson:

So SWAPA will have to give some sort of okay to whatever it is they decide they want to do?

Kurt Heidemann:

Yes, it's an agreement of the association, which means at a minimum it's by the board of directors.

Amy Robinson:

Was there anything else in our section one language that we haven't talked about that you think needs to be covered?

Kurt Heidemann:

I think there's a lot of really important information in section one that we could make another whole podcast on. Things like fragmentation and cabotage and all kinds of other protections that our CBA affords us. But I think the focus for our pilots on a day-to-day basis is really the airline partnerships. It's the scope, and in the case of current events, it's the re-opener language.

So I think that's the most important things that we focus on right now. I would encourage you to get in there and take a look, especially if there's a big commercial action that the Company takes when they bought AirTran. Section one was really the most important part of our contract when that happened. And if that ever happens again, that'll continue to be the case.

Amy Robinson:

I would also put in a little bit of a plug. If you have more questions about Passengers Daily Each Way, there is a video on swapa.org that covers that pretty cleanly and clearly. I think if people have questions, that's a good resource for them as well.

Kurt Heidemann:

Yeah, I think we did that back in 2016 or so. So it's a little older, but all of the information is still current.

Amy Robinson:

Thank you to Kurt for joining us for this section one podcast. This is just part of our education for the first round of SCP on all things section one related.

If you go to the SWAPA website and navigate to the contract 2028 tab at the top, you'll see some more resources on how to get more educated on section one. We mentioned a cartoon in this podcast and you can see that there. And we've also got an article covering the airline partnerships at present. We'll also have some more FAQs all about section one and additional resources, so be sure to check back often.