Southwest Airlines workers get $620 million profit sharing boost
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DALLAS – Southwest Airlines announced a record employee profit share of $620 million for 2015 on Thursday, equivalent to about eight weeks of pay for each eligible employee.
The profit sharing, which is added to employee retirement plans, is equal to 15.6 percent of each employee’s eligible compensation. The amount will be funded on April 29 and brings the company’s cumulative profit share over the last five years to $1.4 billion.
The announcement comes on the heels of a record year of profits for Dallas-based Southwest, which saw the company post $2.2 billion in net income in 2015, driven in large part by massive savings on jet fuel costs as oil prices have plunged.
It also comes at a time when the company’s retirement compensation is being debated as part of ongoing labor negotiations with pilots that have stretched for nearly four years.
Southwest was the first in the industry to offer profit sharing with pilots, tying their fortunes to the broader trajectory of the company. In return, the company offered a smaller maximum retirement contribution than competitors while also requiring pilots to make matching contributions.
Over time, other companies incorporated different types of profit sharing but not the required retirement match for pilots.
For Southwest pilots, the company matches employee retirement contributions dollar for dollar up to a maximum of 9.3 percent. A tentative contract rejected by pilots last fall would have raised the company’s maximum matching contribution up to 10 percent of compensation.
Thursday’s announcement means that pilots who make the full match will see a 24.9 percent employer contribution to their retirement this year, well above the 16 percent guaranteed at American and United.
But Southwest’s profit share contribution has fluctuated in recent years, reaching a recession-driven low of 1.3 percent in 2009 and more recently 3.5 percent in 2012, meaning pilots banked less for retirement than their peers in those years.