Southwest Airlines announced that it will lay off 15% of its corporate workforce, a total of 1,750 employees, marking the company’s first mass layoffs in its history.
The layoffs are set to begin in April and will include senior leadership positions within the company.
The big picture: As part of the restructuring, eleven senior leadership roles, including vice presidents and above, will be eliminated.
- The company expects that these layoffs will result in cost savings of $210 million for the current year and $300 million in 2026.
- Southwest anticipates incurring a one-time charge of $60 million to $80 million for expenses such as severance packages.
Driving the news: Recent years have been tumultuous for Southwest Airlines, with activist investors criticizing the airline’s declining stock price and pressuring for operational and leadership changes.
- In response to investor demands, the company appointed a new CFO, Tom Doxey, who previously held a senior position at Breeze Airways.
- The company’s shift in leadership and operations also included changes such as transitioning from open seating to assigned seating, a move that allows Southwest to charge more for premium seats. This adjustment was part of the changes driven by hedge fund Elliott Investment Management, which had taken a significant stake in the carrier.
- Southwest Airlines faced operational challenges, including a significant number of flight cancellations during the busy holiday travel season in December, which affected the company’s financial performance.
What they’re saying: Southwest CEO Bob Jordan described the layoffs as a “very difficult and monumental shift” in a memo to employees as the company strives to enhance efficiencies and reduce costs in the midst of ongoing transformation efforts.
