Southwest Airlines to slash 15% of corporate jobs in ‘unprecedented’ move to cut costs
In this article
Southwest Airlines
said Monday that it is cutting about 15% of corporate jobs, or about 1,750 people, a move its CEO called “unprecedented” as the company scrambles to cut costs.
The company said it expects savings from the cuts of $210 million this year and about $300 million in 2026. The layoffs will be mostly done by the end of the second quarter and include some senior leadership roles, CEO Bob Jordan said in a staff note, which was seen by CNBC.
“This decision is unprecedented in our 53-year history, and change requires that we make difficult decisions,” Jordan said in a news release. “We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization.”
Southwest’s decision to slash jobs comes several months after a settlement with activist investor Elliott Investment Management, which won five Southwest board seats, short of control. The firm had also pushed for Jordan to be replaced as CEO, though it was not successful.
Other recent cost-cutting measures at Southwest included a hiring freeze, a pause to the internship program and an end to team-building “rallies,” a company tradition that dated back to 1985, CNBC previously reported. It has also aggressively cut unprofitable routes.
Last year, Southwest outlined a plan to increase profits that included ditching its more than 50-year-old open seating model in favor of assigned seats and creating a section with extra legroom. It also recently launched overnight flights for the first time.
“We must ensure we fund the right work, reduce duplicative efforts, and have a lean organizational structure that drives clarity, pace, and urgency,” Jordan said in his memo on Monday.
The layoffs take effect in late April, Jordan said, adding that most affected employees will not work but will still receive salary, benefits and bonus until then.
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Southwest Airlines to cut 15% of its workforce in its first-ever mass layoffs
The slow delivery of planes from Boeing is forcing Southwest Airlines to offer buyouts to some of its employees.
DALLAS – Southwest Airlines announced its plans to cut 15% of its corporate workforce by eliminating nearly 2,000 jobs.
It would be the first mass layoffs in the Dallas-based airline’s 53-year history.
What we know:
Southwest says its “workforce reductions” of 1,750 jobs will focus mainly on corporate overhead and leadership positions, including senior leadership and directors.
It plans to cut 11 senior leadership jobs as part of the restructuring plan.
The cuts are expected to save the company about $300 million a year.
The airline had previously prided itself on never having big layoffs.
Featured
Southwest Airlines is offering buyouts to workers after a slow delivery of planes from Boeing is causing overstaffing issues.
What they’re saying:
“This decision is unprecedented in our 53-year history, and change requires that we make difficult decisions. We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization,” said Bob Jordan, President, Chief Executive Officer & Vice Chairman of the Board of Directors. “I arrived at this decision thoughtfully and carefully, knowing how hard it will be to say goodbye to colleagues who have been a significant part of our Southwest culture and accomplishments.”
The backstory:
Southwest has been working to cut costs and streamline operations after it faced an activist investor battle with Elliott Investment Management last year.
Back in June, Elliott built an 11% stake in Southwest and pressed the airline to improve its financial performance. The two sides reached a truce in October to avoid a proxy fight, but Elliott won several seats on the Southwest board.
“With the best intentions, the growth of our leadership and noncontract functions have outpaced our operation’s growth for many years,” a spokesperson told FOX 4. “Now, this group must become more lean, efficient, and agile to better serve our frontline Employees in our shared mission of serving our customers.”
The airline is also facing a lawsuit brought on by the U.S. Department of Transportation over chronic flight delays and disrupting travel plans.
Featured
The U.S. Department of Transportation is suing Dallas-based Southwest Airlines over chronic flight delays and disrupting passenger travel plans.
What’s next:
The airline says the “separations” will begin in late April. Meanwhile, it says most of those who were notified of their displacement will continue to receive their salaries without needing to report to work.
The Source: Information in this article comes from Southwest Airlines and previous FOX 4 reports.
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