On Monday, Southwest Airlines revealed significant news: they will cut 1,750 jobs. This is the first time in their 53 years that they have had such widespread layoffs.
The job cuts will mainly affect corporate positions, representing about 15% of the workforce. Among those losing their jobs are 11 senior leaders, including several vice presidents. Most of these layoffs will be completed by the end of June.
CEO Bob Jordan described the decision as “unprecedented.” He stated, “We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster and more agile organization.” Jordan knows these layoffs will be tough on employees who have contributed to the company’s success and culture.
Last year, Jordan faced challenges himself when hedge fund Elliott Management acquired a 10% stake in the airline. They pushed for big changes and even suggested Jordan should step down. The firm accused him and the board of being complacent and not keeping costs in check, which hurt profit margins.
In response, Jordan laid out a three-year plan to implement major changes at Southwest. This includes moving from a seat-yourself policy to assigned seating, adding more legroom options, and introducing late-night flights. The first of these new flights began last week.
To appease Elliott, Southwest agreed to add board members they recommended, which led Elliott to drop its demands for Jordan’s removal.
The layoffs will help Southwest save about $210 million this year and $300 million next year, although there will be one-time costs between $60 million and $80 million for severance and benefits for those laid off.
Southwest had a remarkable 47-year streak of annual profits until the pandemic hit in 2020. Since then, it has returned to profitability and remains one of the largest airlines in the U.S. It has never filed for bankruptcy, although its costs have been rising faster than some competitors.
Despite the cuts, Southwest continues to carry more passengers and operate more flights than any other U.S. airline. The airline is well-loved for its customer service. It consistently receives top ratings in satisfaction for economy class travelers, according to J.D. Power, a market research firm.
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Southwest Airlines Company,Layoffs and Job Reductions,Jordan, Robert E (1960- ),Elliott Management Corp,Airlines and Airplanes
