Southwest Airlines to Cut 15% of Corporate Workforce in First-Ever Layoff
Southwest Airlines, known for its long-standing policy of avoiding involuntary layoffs, has announced the first job cuts in its 50-year history. The airline will eliminate approximately 1,750 corporate positions, including senior leadership and director roles, as part of a cost-cutting strategy.
Southwest Airlines, known for its long-standing policy of avoiding involuntary layoffs, has announced the first job cuts in its 50-year history. The airline will eliminate approximately 1,750 corporate positions, including senior leadership and director roles, as part of a cost-cutting strategy.
The layoffs represent 15% of Southwest’s corporate workforce and will begin in late April, with completion expected by the end of the second quarter. CEO Bob Jordan acknowledged the difficulty of the decision in a letter to employees, stating, “With the best intentions, the growth of our leadership and noncontract functions have outpaced our operation’s growth for many years.”
Financial Struggles and Market Reaction
Southwest’s financial challenges have been mounting due to rising costs, inflation, and delayed aircraft deliveries from Boeing. The airline’s stock fell nearly 10% in 2024 before the announcement. The job cuts are expected to save $210 million in 2024 and $300 million in 2025, though the company will incur a one-time charge of $60 million to $80 million this quarter.
Impact on Southwest’s Culture and Future Plans
The move has raised concerns about Southwest’s employee-centric culture, a philosophy championed by co-founder Herb Kelleher, who believed that happy employees led to happy customers. Despite these concerns, analysts believe the layoffs were necessary.
Southwest, which aggressively expanded during the pandemic by adding 18 new cities, is now scaling back its growth. The airline plans to limit capacity expansion to 1%-2% per year through 2027. Additionally, it is modifying its one-size-fits-all business model by introducing premium seating and extra legroom options.
Elliott Investment Management’s Role
The job cuts come amid activist investor Elliott Investment Management’s push for change at Southwest, though analysts note that the airline had been considering restructuring long before Elliott’s involvement.
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