Southwest Airlines Inks Provisional Deal With Simulator Technicians

Southwest Airlines LUV received encouraging tidings on the labor front when it inked a tentative agreement with the company's flight simulator technicians' union, International Brotherhood of Teamsters Local 19, for a new collective bargaining agreement. There are more than 50 flight simulator technicians at the Dallas-based carrier. These technicians are responsible for providing essential maintenance and engineering support. By doing so, they ensure the reliability and safety of flight training equipment.

Now the provisional deal will be voted upon by flight attendants. This deal will be materialized only if the voting outcome is favorable. The agreement on becoming effective will make simulator technicians eligible for significant gains in compensation. The tentative deal inked with simulator technicians is no doubt a welcome development. The company would be hoping that this deal gets approved. We note that satisfied labor groups generally lead to greater operational efficiency.

With U.S. airlines grappling with labor  shortage, as air-travel demand bounced back strongly from the pandemic lows, we have witnessed quite a few deals for various labor groups in the U.S. airline space recently. At Southwest Airlines itself, 11 out of 12 union-represented workgroups have ratified new agreements since October 2022.

In August 2023, American Airlines' AAL four-year pact with pilots was ratified. The approval made AAL's pilots eligible for an immediate pay raise in excess of 21%, on average. Also, this deal included provisions aimed at improving pilots' quality of life. In 2023, Delta Air Lines DAL pilots ratified a four-year deal, which made its 15,000 pilots eligible for a 34% pay hike in the next four years.

Disappointing Price Performance of LUV Stock

Due to headwinds like escalated operating costs, shares of Southwest Airlines have not performed well lately, having lost 11.9% in the past six months compared with its industry's 3.1% decline in the same time frame.

Six-Month Price Comparison

Image Source: Zacks Investment Research

Southwest Airlines' Zacks Rank

LUV currently carries a Zacks Rank #3 (Hold).

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