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Southwest Airlines (LUV) Pilots Agree on Tentative Contract

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Southwest Airlines Co. (LUV - Free Report) announced that it has formulated a new tentative agreement with its pilots. The company and  the union representing its pilots, Southwest Airlines Pilots' Association,  have agreed “in principle” to the terms of this new contract.

The airline has been negotiating for a while, with the assistance of the National Mediation Board. The final draft of the agreement will be prepared by the Negotiating Committees, post which the union ratification process will begin. The company will announce the details related to the ratification process later.

The current contract – applicable to 8000 pilots of the company – became amendable on Sep 1, 2012. Per media reports, the new contract also includes retroactive pay to 2013 and salary hikes. The deal, on materialization, will apparently continue till Aug 31, 2020.

Earlier this year, Southwest reached a deal with its ground staff. The company’s Ramp, Operations, Provisioning, and Cargo Agents had approved the tentative agreement reached in Dec 2015 by a narrow margin.

Recently, the airlines announced that the Senior Vice President of Labor Relations – Randy Babbitt – will be retiring in fall this year. His retirement comes at a crucial point for the company when it is striving to reach deals with its employees and improve performance and revenues.

Recent Incidents

Southwest has been facing some challenges of late. A Southwest plane from New Orleans to Florida suffered an engine issue and had to make an emergency landing at Pensacola International Airport. The incident is currently under investigation.

The carrier also faced a computer router failure a few weeks back, resulting in the cancellation and delays of several Southwest flights worldwide. This led to curtailing the Revenue per Available Seat Mile (RASM) guidance for the third quarter. RASM is now expected to decline in the range of 3.5-4.5% in the quarter compared with the earlier projected range of a decline of 3.0–4.0%.

Zacks Rank and Stocks to Consider

Southwest currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the airline industry include ANA Holdings Inc. (ALNPY - Free Report) , Copa Holdings SA (CPA - Free Report) and SkyWest Inc. (SKYW - Free Report) with a Zacks Rank #2 (Buy).  

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