Southwest Airlines To Cut 15% Of Corporate Jobs

(RTTNews) - Shares of Southwest Airlines Co. were gaining around 2 percent in the pre-market activity on the NYSE after the airline announced around 15% reduction in its corporate workforce, the first time in its 53-year history, as part of its cost cut initiatives.

Aiming for a leaner and more agile organization under its transformational plan, the company plans to reduce around 1,750 employee roles almost entirely on corporate overhead and leadership positions.

Eleven senior leadership positions, such as Vice President and above, also representing 15 percent of the Company's senior management committee, will be eliminated as part of the restructuring. The company noted that layoffs will be substantially complete by the end of second quarter 2025.

It was reported that the layoffs will not begin until late April. Until then, most employees who are notified of their displacement will not work but will continue to receive their salary, benefits, and, if eligible, bonuses.

Bob Jordan, President, Chief Executive Officer & Vice Chairman of the Board of Directors, said, "This decision is unprecedented in our 53-year history, and change requires that we make difficult decisions... 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 planned workforce reduction will result in partial year 2025 savings of around $210 million and full-year 2026 savings of around $300 million.

The proposed savings exclude an expected one-time charge in first quarter 2025 in the range of $60 million to $80 million, substantially all of which is related to severance payments and post-employment benefits, which would be treated as a special item.

Southwest will continue to report on additional cost-savings actions as 2025 progresses.

Southwest, which took flight in 1971, had been engaged in a tussle last year with its shareholder Elliott Investment Management L.P., which for long had been trying to overhaul the airline's leadership, demanding better performance.

Amid the issues, the company in late September had outlined next steps in a comprehensive three-year plan expected to increase revenue opportunities. The plan included an estimated $500 million run rate of cost savings in 2027, through minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities, and improving corporate efficiency.

In late January, while announcing fourth-quarter results and outlook, Southwest had noted that it was urgently working to accelerate and exceed its 2027 $500 million cost reduction target to help mitigate cost inflation through the proposed plans.

In its fourth quarter, the company reported a profit compared to prior year's loss, benefited by higher revenues. Southwest also issued outlook, expecting weak capacity in its first quarter, but growth in second quarter and fiscal 2025. The company also said then that it continues to plan for annual capacity growth through 2027 in the 1 percent to 2 percent range, year-over-year.

CEO Jordan then added, "As we look forward, 2025 will be a pivotal year as we continue to execute and deliver on our 'Southwest. Even Better.' transformational plan, the largest and most comprehensive in our 53-year history."

In pre-market activity on the NYSE, the shares were trading at $30.80, up 1.72%.