Southwest Airlines plans to cut 15 percent of its corporate workforce in a bid to cut costs.
The layoffs – a first in the airline’s 53-year history – will slash around about 1,750 jobs.
The cuts make a shift in strategy following last year’s battle with activist hedge fund Elliott Investment Management. To keep Elliot at bay, bosses agreed to cut costs and find new ways to make money, such as charging for seating.
Unlike its rivals, Southwest had long avoided mass job cuts, even during economic downturns, 9/11, and the pandemic.
But after a hiring spree in recent years, the airline is now under investor pressure to rein in costs.
Rising labor expenses from new union agreements and inflation have squeezed profit margins, despite strong travel demand.
Some fear it could mean more cuts to routes, but bosses say these job cuts are focussed on cutting head office jobs, especially those in roles that overlap.
CEO Bob Jordan acknowledged the corporate workforce had grown faster than the rest of the airline and said the decision was made to improve efficiency.
Southwest Airlines has warned that it will have to make some ‘difficult decisions’ in coming days under a plan to restore profits
‘We must ensure we fund the right work, reduce duplicative efforts, and have a lean organizational structure that drives clarity, pace, and urgency,’ Jordan wrote in a message to employees Monday.
Southwest Airlines is targeting corporate and management roles in its job cuts, eliminating 11 senior leadership positions. The restructuring is expected to save $210 million this year and $300 million in 2025.
It comes after cuts to routes last year – plus the axing of perks.
In September, Southwest cut almost a third of its flights to and from Atlanta in a blow to the city and staff based there.
The loss of flights at Atlanta comes after even more drastic changes in April, when Southwest axed flights to four airports and fired 2,000 staff.
In September, Southwest also said it is axing its popular open seating policy after half a century. Instead, it will soon charge passengers a fee to pick a seat.
Activist investors had also demanded that Southwest’s iconic ‘bags fly free’ perk is ditched – they said that charging for baggage would bring in tens of millions of dollars in revenue.
But for now the perk is staying.
The carrier has already pulled passenger-friendly policies like open seating, as it attempts to fend off changes demanded by activist Elliott Investment Management
CEO Bob Jordan acknowledged the corporate workforce had grown faster than the rest of the airline
A Southwest passenger reported seeing 30 wheelchair users board. Here is a photo they took of many of them waiting to get on the flight to Tampa
Southwest, which once boasted a record 47 consecutive years of profit prior to the pandemic, is currently struggling to regain sustained profitability.
A report out earlier this year showed how airlines including Delta, United and American pocketed a staggering $33.3 billion from just baggage fees last year – a sharp 15 percent rise from $29 billion in 2022.
This sum is solely made up of fees from larger carry-on bags, standard checked baggage fees, and fines for overweight or extra large checked bags and accounted for 4.1 percent of global airline revenue last year.
Meanwhile, in January there was backlash against Southwest for letting able-bodied flyers use wheelchair assistance to board early.
A passenger tweeted that he had counted 30 people get early boarding after lining up in wheelchairs.
But only two needed them to disembark, he wrote – suggesting 28 passengers has either been cured on the flight or were gaming the system.
Under the tweet, other Southwest customers slammed those abusing the loophole – saying it was unfair on those who are genuinely disabled as well as the few that pay for early boarding.
