US: Furloughs at legacy airlines could help low-cost carriers like Southwest

US legacy airlines with lacklustre employee demand for early exit packages face large furloughs in the fall, signaling higher post-pandemic labour costs because union contracts require airlines to furlough in reverse order of seniority. This could create a competitive boost for budget carriers including Southwest, whose lower cost structure could help it win market share with cheaper fares, experts said. Labour will be the biggest single cost for airlines struggling to weather the coronavirus crisis that has crushed air travel demand. With no quick recovery in sight, United said Wednesday it was sending 36,000 furlough warnings to union workers after having received only 3,700 volunteers for early exit deals, with flight attendants the hardest hit. By contract, lower salaried union workers have to be furloughed first, creating a higher per-seat-mile labour cost and a larger cost gap against low-cost carriers. "And I imagine ticket prices will flow more or less in line with that," said Diamond Hill Capital Management analyst Blake Haxton. Low-cost carriers like Southwest have another advantage: their networks are more focused on domestic leisure travel, where demand is seen recovering first. Legacy carriers, on the other hand, generate more profit from business travel, which remains anemic. "It's a perfect storm for the legacy carriers," Haxton said.<br/>