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Southwest Airlines is set to lay off approximately 1,750 employees (around 15% of its workforce) in corporate and leadership roles as part of a significant cost-reduction initiative.
The redundancies, the first involuntary job cuts in the airline’s 53-year history, will begin in late April and are expected to be largely completed by the end of the second quarter, said the company.
“This is a difficult but necessary step,” Southwest CEO Bob Jordan wrote in a letter to employees. “For years, our leadership and non-contract workforce have expanded faster than our operations, and we must realign.”
The layoffs are the latest in a series of strategic shifts at the Dallas-based airline. In recent months, it has faced pressure from activist investor Elliott Investment Management which holds an 11% stake in the firm and tried to force a proxy vote to install its eight board nominees and take majority board control. Instead an agreement was reached on a reconstituted board of directors that keeps Southwest's current leadership in control.
It has also been rethinking its long-held no-frills business model. The company is introducing premium seating options and red-eye flights in a move away from its traditional low-cost approach.
Financial pressures and workforce reductions
Southwest has long taken pride in never forcing layoffs, even during major industry crises such as the 9/11 attacks or the COVID-19 pandemic. Rising operational costs and delayed aircraft deliveries from Boeing have, however, forced the company to revise its growth strategy.
Last month, it froze hiring for management and corporate positions, following a suspension of pilot and flight attendant hiring in 2023. In November, voluntary buyout offers and extended leave options were presented to airport employees in 18 cities, including Los Angeles and Atlanta.
The company’s chief financial officer and chief administrative officer have also announced their retirements, signalling further structural changes.
Despite those measures, financial challenges persist. Although the airline posted improved earnings in the fourth quarter of 2024, it cautioned on January 30 that inflationary pressures and higher labor costs would outpace expected revenue gains. The company expects to save $210 million in 2024 and $300 million in 2025 from the announced layoffs.
“Becoming a more agile company requires changes in how we work,” Jordan told employees. “This is part of our journey toward a leaner, more focused organization.”
Cultural and investor impact
The layoffs are an unfortunate departure from Southwest’s long-standing employee-first culture. Founded by Herb Kelleher, the airline built its reputation on the belief that happy employees lead to happy customers and, ultimately, strong financial performance. The airline’s stock symbol, LUV, reflects that ethos, and many of its aircraft feature heart-themed designs.
However, critics argue that Southwest’s rapid expansion - adding 18 cities to its network since the pandemic - has diluted that company culture. In the wake of workforce reductions, concerns are growing about employee morale and the long-term effects on customer service.
A round of layoffs are unlikely to have a positive effect on employee morale.
Meanwhile, Southwest shares dipped slightly on Tuesday following the layoff announcement, bringing its year-to-date decline to nearly 10%, compared to a 4% gain in the S&P 500.
Despite recent investor activism, industry analysts suggest that workforce cuts were an inevitable step for Southwest.
“While Elliott Investment Management’s involvement may have accelerated this decision, Southwest had been evaluating cost reductions independently,” said one analyst. “The organization had become too large and needed adjustment.”
