Despite four labor groups calling for his departure, Southwest Airlines (LUV, Financial) CEO Gary Kelly said he is not going anywhere.
The company’s four largest unions, which represent about 36,000 of the 52,000 employees, called for Kelly and Mike Van de Ven, executive vice president and chief operating officer, to step down.
The Southwest Airlines Pilots Association started the movement on Monday and was joined by groups representing flight attendants on Tuesday. Unions for mechanics, baggage handlers and other airport ground-operations workers followed suit on Wednesday.
The unions cited a systemwide technical outage in July as grounds for their removal. Although the computers were restored 12 hours into the outage, flights continued to be canceled or delayed for several days as the airline attempted to reorganize its crews and planes. In addition, the unions voiced displeasure with the executives’ focus on cutting costs and spending billions buying back company stock.
The airline has also deferred negotiations on new contract terms with the pilots, flight attendants and mechanics, creating tension.
In a video addressed to the company’s employees, Kelly, who has served as CEO since 2004, claimed the personal attack against him is part of a negotiating ploy and said he and Van de Ven have “important work to do and important issues to address” and would not be distracted by the unions’ attacks.
The Dallas-based airline was established in 1967 by Herb Kelleher and adopted its current name in 1971. Southwest is the world’s largest low-cost carrier and operates more than 3,800 flights per day. It has a market cap of $23.26 billion with an enterprise value of $22.6 billion. It has a price-earnings (P/E) ratio of 9.5 with a forward P/E of 9.3. It has a price-book (P/B) ratio of 2.9 and a price-sales (P/S) of 1.14. GuruFocus ranked its financial strength 7 of 10 and its profitability and growth 8 of 10. The company’s operating margin is at 21.8%, which is ranked higher than 89% of its competitors.
The company has not fared well on Wall Street, either. On Tuesday afternoon, shares fell more than 3%, now down 17% for the year to date.
Disclosure: I do not own stock in any companies discussed in the article.
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