Jack Otter and the panel discuss the downfall of Southwest Airlines’ popularity and how they could turn it around on ‘Barron’s Roundtable.’
Southwest Airlines cut 15% of its corporate workforce as it tries to rapidly reduce overhead costs to become a “leaner” company.
The airline said that the layoffs primarily target corporate overhead and leadership positions, including senior leadership and director roles. In total, 1,750 jobs will be affected, including 11 senior leadership positions, as the carrier strives to build a “leaner and more agile organization” under its transformational plan.
“We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization,” CEO Bob Jordan said in a statement.
SOUTHWEST TO PAUSE SOME HIRING, SUMMER INTERNSHIPS IN COST-CUTTING MEASURE
Southwest said most of the separations will be completed by the end of the second fiscal quarter, and will result in approximately $210 million in savings for fiscal year 2025 and $300 million for the full 2026 fiscal year.
The company expects to incur $60 million to $80 million in costs related to severance payments and post-employment benefits in the first quarter of fiscal year 2025.
Travelers use a Southwest Airlines Co. self check-in kiosk at Logan International Airport (BOS) in Boston, Massachusetts, U.S., on Friday, July 19, 2019. ( Scott Eisen/Bloomberg via Getty Images / Getty Images)
Southwest has made substantial changes to rein in costs, particularly after activist investor Elliott Investment Management took a $2 billion stake in the carrier and subsequently called on the airline to take actions such as making leadership changes to improve its financial performance.
Last month, the company announced it was halting certain corporate events and pausing some hiring and most summer internships, though it plans to honor offers that were already made, in order to limit discretionary spending.
Southwest Airlines Boeing 737-700 aircraft landing at Ronald Reagan Washington National Airport. (Getty Images / Getty Images)
Southwest CEO Bob Jordan told employees in a January memo that “every single dollar matters as we continue to fight to return to excellent financial performance,” The Wall Street Journal reported.
Last fall, the carrier said it would be “minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities, and improving corporate efficiency” while implementing a “multi-year” plan to improve its finances. Southwest is aiming to achieve a $500 million run rate in savings in 2027, the company said at its investor day in September.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| LUV | SOUTHWEST AIRLINES CO. | 30.28 | +0.35 | +1.17% |
During the investor day, Southwest also detailed big changes it has in the pipeline, such as offering assigned seats, evolving its boarding process and introducing premium seating. It will also start operating red-eye flights in February to “maximize aircraft utilization” and shorten the turnaround time for planes between flights.
FOX Business’ Aislinn Murphy contributed to this report.
