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 practically 12,000-person company workforce. Southwest may also eradicate eleven senior management positions on the vp 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, sooner, 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 tip of the second quarter of 2025, or the tip of June. The cuts is not going to have an effect on front-line staff 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 averted mass layoffs throughout financial recessions, the Sept. 11, 2001, terrorist assaults, and the pandemic, however has just lately confronted strain to scale back prices from activist buyers and growing labor prices. The airline’s most recent earnings report for the fourth quarter of 2024 exhibits that its Price Per Obtainable Seat Mile (CASM), or the associated fee for an airline to fly a single seat, elevated by 11.1% year-over-year. Southwest partly blamed the rise on “elevated labor value strain.”
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 no longer solely has vital illustration on Southwest’s board however is now one of many airline’s biggest investors, with a stake of over 10%, or practically $2 billion.
Southwest is now implementing among the adjustments Elliott recommended final yr, 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.
