By Niraj Chokshi
Southwest Airlines earlier this week announced plans to cut 15% of its workforce, the first round of broad layoffs in the airline’s 53-year history.
The company said it planned to cut about 1,750 jobs, with the cuts mostly focused on corporate positions. The layoffs will include 11 senior leaders with titles of vice president or higher, the airline said. Most of the cuts will be carried out by the end of June.
In a statement, Southwest CEO Bob Jordan called the decision “unprecedented.”
“We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster and more agile organization,” he said. “I arrived at this decision thoughtfully and carefully, knowing how hard it will be to say goodbye to colleagues who have been a significant part of our Southwest culture and accomplishments.”
Jordan’s own job was under threat last year after hedge fund Elliott Management amassed an approximately 10% stake in the airline and began to push for widespread change, including Jordan’s ouster. Elliott had accused Jordan and the airline’s board of complacency and failing to control costs, eroding profit margins that were once the envy of the industry.
In response, Jordan laid out a three-year plan to make sweeping changes, including dropping the airline’s seat-yourself policy in favor of assigned seating, adding seats with extra legroom and introducing red-eye flights — the first of which began last week — to make more use of its planes.
Southwest also agreed to add board members recommended by the investment firm, and Elliott ultimately dropped its demand for Jordan’s departure.
The job cuts announced Monday will save Southwest about $210 million this calendar year and $300 million next year, the airline said. But those figures do not include a one-time cost of $60 million to $80 million to pay out severance and other benefits to laid-off workers.
Southwest had an unrivaled 47-year streak of annual profits until 2020, when it lost money along with the rest of the industry during the COVID-19 pandemic. It has reported profits each year since and remains the only one of the four largest U.S. airlines to have never filed for bankruptcy protection, although its costs have outpaced those of some of its peers.
Still, the airline, which offers only limited international flights, is a behemoth: Southwest carries more passengers and operates more flights in the United States than any other carrier. The airline is also beloved by flyers, who have routinely given its economy class the highest customer-satisfaction scores of any carrier, according to J.D. Power, a market research firm.
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