Southwest Airlines Co. LUV has reached a tentative agreement with the Aircraft Mechanics Fraternal Association, representing 2,400 of its employees involved in the aircraft mechanics workgroup.
Notably, negotiations for the agreement went on for almost six years. Per the agreement, employees will receive a 14.8% increase in wages and a ratification bonus of $91 million in retroactive compensation. Also, the agreement will provide a 3% annual wage hike to employees as long as the contract is valid. Simultaneously, the contract furnishes an updated set of work rules and is valid until Apr 1, 2023. Final ratification of the contract is pending.
A series of labor deals has been inked in the airline space over the past few months. Last month, JetBlue Airways Corporation JBLU signed an agreement in principle with its pilots. Final ratification of the same is still pending. Earlier in March, Spirit Airlines, Inc. SAVE ratified its five-year deal with pilots, pertaining to wage raise.
With companies striking multiple labor deals, the bottom line in each case could be pressurized. Even though such treaties ensure the performance efficiency of airline staff, high employee wages add to operating costs, eroding profits in the process.
Zacks Rank & Key Pick
Southwest holds a Zacks Rank #5 (Strong Sell).
A better-ranked stock in the broader Transportation sector is Expeditors International of Washington, Inc. EXPD, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Expeditors have gained more than 10% in the last six months.
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