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Southwest Airlines will cut about 1,750 jobs in its leadership ranks, a dramatic step to reduce expenses that mark the first layoffs in the carrier’s history.
The pullback will impact 15 percent of corporate positions, including senior leadership and directors, the airline said Monday in a statement. The reductions start in late April and will be “substantially complete” by the end of the second quarter.
“This is a very difficult and monumental shift,” Chief Executive Officer Bob Jordan said in a letter to workers. “With the best intentions, the growth of our leadership and noncontract functions have outpaced our operation’s growth for many years.”
The job cuts extend the upheaval that has gripped Southwest for much of the past year, which featured a battle with activist Elliott Investment Management, a board overhaul, and significant operational changes. The airline is rethinking its long-held and famous one-size-fits-all business model and will offer premium seats and some with more legroom after just beginning redeye flights.
Southwest has long boasted of never having an involuntary layoff over a history stretching back more than five decades, but the carrier has taken steps to rein in its workforce. The company last month paused hiring for management and headquarters jobs, and last year it suspended the hiring of pilots and flight attendants. In November, it offered voluntary buyout packages or extended leaves to airport workers in 18 cities, including Los Angeles and Atlanta.
The airline’s finance chief and top administrative officer also announced their retirements recently.
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Southwest shares fell less than 1 percent at the start of trading in New York on Tuesday. The stock had declined 9.9 percent this year through February 14, compared with a 4 percent gain in the S&P 500 Index.
The airline expanded during the pandemic, adding 18 cities to its route network, on the expectation it would grow coming out of the downturn as it had done in the past, said Savanthi Syth, a Raymond James analyst. But costs rose, aircraft deliveries from Boeing Co. faltered and the carrier was forced to pull down expansion plans. Southwest plans to hold capacity expansion to 1 percent to 2 percent each year through 2027.
“There is a lot of finger-pointing to Elliott and how aggressive this was, but it’s unfortunately something that needs to be done,” she said in an interview. “Elliott might have had some influence, but Southwest was understanding that some of this had to get done. They were talking about adjusting operations long before Elliott was involved. They were recognizing that the organization was too big.”
The layoffs may have a greater impact on Southwest’s vaunted culture than on its cost-reduction plan. The airline’s care for its workers is a key part of the philosophy crafted by co-founder and former CEO Herb Kelleher that happy employees would lead to happy customers, profitability, and happy Southwest shareholders. The airline’s stock symbol is LUV and hearts adorn many of its planes.
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Critics say the culture has suffered with the growth of the airline, which earned loyalty in part by not furloughing workers against their will after the 2001 terrorist attacks or during the pandemic. Employees in the past, however, sometimes had to choose between their jobs or moving to a new location.
Costs Climbing
While the carrier’s financial performance improved in the final quarter of 2024, it also warned on January 30 that costs would climb faster than expected, undercutting gains from strong demand for leisure travel. Southwest blamed a “continuation of inflationary pressures,” including costly labor contracts ratified last year.
Southwest expects to save $210 million this year from the newly announced job cuts and $300 million next year. It will incur a one-time charge this quarter of $60 million to $80 million.
“Changing how we work is an essential part of becoming a more agile company, and it will be a journey,” Jordan said in the note to employees. “We are building a leaner organization with increased clarity regarding what is most important.”
