Southwest Airlines is set to trim 15% of its corporate workforce, encompassing senior-level personnel.
Southwest Airlines is shaking things up, announcing layoffs for 11 senior leadership roles, including vice presidents, coming in April. This move is projected to save the company an impressive $210 million this year and a whopping $300 million by 2026. Expect a one-time charge between $60 million to $80 million for associated costs, such as severance packages.
CEO Bob Jordan, in a note to employees last Monday, acknowledged that these layoffs would be challenging. He referred to this transformation as a significant leap, emphasizing the importance of streamlining operations and cutting costs.
The airline has had a tumultuous few years, with its share price dropping over 50% from early 2021. However, Southwest exceeded analyst expectations in its latest earnings report in January, thanks to rising airfares.
In June 2024, hedge fund Elliott Investment Management took a massive $1.9 billion stake in the carrier, pushing for a leadership and operations overhaul. Southwest brought in Tom Doxey, as the new chief financial officer earlier this year, with Linda Rutherford and Tammy Romo set to retire from their positions in April 2025.
Beyond corporate leadership changes, Elliott Investment Management also instigated a shift in the company's seating policy, reversing the open seating policy to assigned seats. This change allows for premium seat pricing.
Southwest took a significant financial blow following an operational meltdown that caused over 16,700 flight cancellations during the busy holiday travel week in late December 2024. The employees blamed the situation on an outdated staff scheduling software that exacerbated difficulties in recovering from seasonal bad weather.
Despite boasting of no layoffs in 2021, the company now embraces this challenging transformation as CEO Gary Kelly said, "we have a strong desire to take great care of our people and then, in turn, our customers."
Sources:[1] CNN Business[2] New York Post[3] Southwest Airlines media release
- Southwest Airlines, expecting to save $210 million this year and an additional $300 million by 2026, announced layoffs for 11 senior leadership positions, including vice presidents, in April to hedge against financial challenges.
- The billion-dollar hedge fund Elliott Investment Management, which acquired a significant stake in Southwest in June 2024, anticipated that these layoffs would contribute to the company's cost-cutting measures.
- After posting impressive earnings in January due to rising airfares, Southwest's CEO, Gary Kelly, acknowledged the need for layoffs, stating that the company has a strong desire to take care of its employees and, subsequently, its customers.
