Southwest Airlines Pilots' Association, Airline Jointly Announce Vote to Maintain 10-Year Agreement

Southwest Airlines' pilots agreed by an overwhelming majority to keep an unprecedented ten-year agreement which originally became effective in 1994.

The ten-year agreement, which froze the pilots' pay scale for the first five years of the contract in exchange for a substantial number of stock options, contained a unilateral provision which allowed pilots to reopen contract negotiations at the midpoint of the agreement in 1999.

In a vote by members of the Southwest Airlines Pilots' Association tabulated by the association at midnight Thursday, more than 78 percent of the voting pilots agreed to continue the contract.

The agreement now becomes amendable Sept. 1, 2004.

"This highly cohesive and unified group of pilots voted to stay the course," said John Kramer, president of the Southwest Airlines Pilots' Association, which represents the airline's nearly 2,800 pilots. "To date, by participating in the growth of the market value of Southwest Airlines, pilots have been compensated to a greater degree than would have been possible through pay raises."

Kramer further said: "The pilots of Southwest Airlines believe in the future of the airline. The union's educational effort concerning stock options and other contractual provisions and comparisons was comprehensive. This shows that labor groups can understand and appreciate the value of unconventional compensation methods.

"By staying the course on this agreement, the pilot group has the opportunity to be the most richly rewarded pilot group in America and one that, at the same time, encourages continued Southwest Airlines growth through this earnings-enhancing contract. It's a win-win agreement."

Southwest Chairman, President, and CEO Herbert D. Kelleher joined Kramer in praising the decision of Southwest's pilots to maintain the contract. "As I said in November 1994 when SWAPA's negotiating committee and board originally recommended this contract to our pilots, this agreement represents a bold statement by our pilots that they stand ready to lead Southwest into the next century as the low-cost leader of the airline industry."

"The dedication of our pilots, in demonstrating a willingness to tie their own economic rewards to the success of Southwest Airlines, illustrates once again why the pilots of Southwest Airlines are widely recognized as not only the best, the most carefully selected, and the safest pilots in the world, but also the most visionary and entrepreneurial," Kelleher said.

Southwest Airlines, which currently employs more than 25,875 workers, was named "The Best Company to Work for in America" in the January 1998 issue of FORTUNE magazine.