In a regulatory filing on Monday, Southwest Airways announced its first-ever spherical of mass layoffs in its 53-year historical past because the airline goals to chop prices.
The cuts have an effect on 1,750 company staff or 15% of Southwest’s almost 12,000-person company workforce. Southwest can even remove eleven senior management positions on the vice chairman stage and above, the equal of 15% of its senior administration committee.
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“This determination is unprecedented in our 53-year historical past, and alter requires that we make tough choices,” Southwest CEO Bob Jordan said in a press release. “We’re at a pivotal second as we remodel Southwest Airways right into a leaner, quicker, and extra agile group.”
Southwest estimates that the layoffs will lead to $210 million in value financial savings in 2025 and $300 million in 2026. The airline will start letting go of staff in April and end the layoffs by the top of the second quarter of 2025, or the top of June. The cuts won’t have an effect on front-line employees like pilots and flight attendants.
In a note to employees on Monday obtained by ABC Information, Jordan wrote that the cuts could be “a really tough and monumental shift” however would assist the airline work to attenuate prices.
Southwest prevented mass layoffs throughout financial recessions, the Sept. 11, 2001, terrorist assaults, and the pandemic, however has not too long ago confronted stress to cut back prices from activist buyers and rising labor prices. The airline’s most recent earnings report for the fourth quarter of 2024 reveals that its Value Per Out there Seat Mile (CASM), or the price for an airline to fly a single seat, elevated by 11.1% year-over-year. Southwest partly blamed the rise on “elevated labor value stress.”
Southwest additionally engaged in a four-month combat with a $69 billion hedge fund and activist investor Elliott Funding Administration. The problem resulted in a truce in October, throughout which Southwest appointed 5 board administrators that Elliott nominated (out of a complete of 13) board members. Elliott not solely has important illustration on Southwest’s board however is now one of many airline’s biggest investors, with a stake of over 10%, or almost $2 billion.
Southwest is now implementing a few of the adjustments Elliott steered final 12 months, similar to overhauling its open seating plan with assigned seats and the choice to purchase spots with extra legroom. Nonetheless, these adjustments may take a number of years to finish.
Regardless of numerous pressures, Southwest reported record revenue of $27.4 billion in 2024.
