Southwest offering buyouts to about 9,000

Southwest Airlines Co., already slowing growth to help boost profits, is offering buyouts to 27 percent of its employees to reduce operating costs.

About 9,000 workers are eligible for the buyouts, which include $25,000 in cash, medical and dental benefits, and travel privileges, spokeswoman Brandy King said yesterday. It is the second such program in the Dallas airline's 36-year history.

Southwest employs 230 at Philadelphia International Airport, where it has eight gates and operates 66 flights a day.

The buyout is Southwest's latest effort to offset rising spending on labor and fuel, its two largest expenses. The airline said in June that it would slow capacity growth in this year's fourth quarter and all of 2008 to maximize revenue on each flight.

"Southwest is a very lean company, so when they do something like this, it's suggesting they see less growth ahead, which is a good thing," said James M. Higgins, an analyst with Soleil Securities Group Inc.

Southwest set an Aug. 10 deadline for workers to accept the buyouts, which were offered to flight attendants, ramp agents, and employees in customer service, reservations, operations and freight. The program is available to those who have reached a pay scale of 10, which generally means 10 years of service for holders of union jobs, King said.

Southwest does not have targets for buyout acceptances or savings, she said.

Employees were asking for a package similar to Southwest's 2004 offer, which resulted in 1,000 buyouts, King said, adding: "This was the answer. It's also an effort to further address the impact of rising costs."

The airline's cost to fly each seat a mile, a measure of efficiency, has risen 20 percent in four years, threatening its ability to increase profits while charging its signature low fares.

Southwest spent more than $2.14 billion on jet fuel in 2006, 59 percent more than a year earlier. Labor costs rose 9.7 percent, to $3.05 billion.

"They are still coming to grips with the fact that high fuel prices make their costs so high that they cannot price tickets" at the low levels needed to boost sales, Higgins said.

In addition to slowing the expansion of its fleet, Southwest plans to change its boarding and seating practices and frequent-flier reward program to help win more business travelers. Southwest expects those changes, and other steps, to produce $1 billion in new annual revenue by 2010. Sales in 2006 totaled $9.1 billion.

The airline will report its second-quarter financial results today.