Southwest Airlines Announces First-Ever Layoffs to Cut Costs; Set To Impact 15 Percent Of Corporate Ranks

Southwest Airlines has announced plans to lay off approximately 1,750 employees in its leadership ranks, marking the first job cuts in the airline’s history. The decision, aimed at reducing expenses, will impact around 15% of corporate positions, including senior leadership and directors. According to a statement released on Monday, the layoffs will begin in late April and are expected to be largely completed by the end of the second quarter.

A Difficult but Necessary Decision

Southwest CEO Bob Jordan acknowledged the gravity of the situation in a letter to employees.

“This is a very difficult and monumental shift,” Jordan wrote. “With the best intentions, the growth of our leadership and noncontract functions have outpaced our operation’s growth for many years.”

The job cuts come amid broader changes within the airline, including a significant restructuring of its leadership team. These changes have been fueled by internal challenges as well as external pressures from activist investor Elliott Investment Management, which has been pushing for reforms.

Southwest Rethinks Its Business Model

The airline is undergoing a major transformation, reconsidering its traditional one-size-fits-all business model. In recent months, Southwest has introduced new services such as premium seating options and expanded legroom on certain flights. Additionally, it has started offering redeye flights—something the airline had long resisted.

For decades, Southwest took pride in never having an involuntary layoff. However, financial pressures and changing market conditions have forced the company to rethink its workforce strategy. Last month, hiring for management and headquarters positions was put on hold, and the hiring of pilots and flight attendants had already been suspended in 2023. In November, voluntary buyout packages and extended leave options were offered to airport workers in 18 cities, including Los Angeles and Atlanta.

Financial Struggles and Market Reaction

The company’s financial struggles have been reflected in the stock market. On Tuesday, Southwest shares dropped by less than 1% in early trading in New York. Since the start of the year, the stock has declined by 9.9%, compared to a 4% gain in the S&P 500 Index.

Analyst Savanthi Syth from Raymond James pointed out that Southwest had expanded its route network significantly during the pandemic, adding 18 new cities. The expectation was that the airline would bounce back strongly after the downturn, as it had in the past. However, rising costs, delays in aircraft deliveries from Boeing, and market shifts forced the airline to scale back its expansion plans. The company now plans to keep capacity expansion at a modest 1% to 2% annually 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,” Syth 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.”

Impact on Company Culture

Beyond cost-cutting, the layoffs may affect Southwest’s renowned workplace culture. The airline’s philosophy, championed by co-founder and former CEO Herb Kelleher, emphasized that happy employees would lead to happy customers and shareholders. The airline’s stock symbol, LUV, and heart-themed branding have long represented this employee-first approach.

Cost-Saving Measures and Future Plans

Despite improved financial performance in the last quarter of 2024, Southwest warned on January 30 that rising costs could erode its gains. The airline cited ongoing inflationary pressures, including expensive labor contracts ratified last year, as a major concern.

To counteract these financial challenges, Southwest expects to save $210 million in 2024 from the job cuts and an additional $300 million in 2025. However, the restructuring will result in a one-time charge of $60 million to $80 million in the current quarter.

CEO Bob Jordan emphasized the need for these changes in his message to employees.

“Changing how we work is an essential part of becoming a more agile company, and it will be a journey,” he said. “We are building a leaner organization with increased clarity regarding what is most important.”

While Southwest remains a beloved airline with a strong brand identity, these significant changes mark a new chapter in its history as it navigates financial pressures and shifting industry dynamics.