I wrote on Sunday that there were murmurs of layoffs in the offing at Southwest Airlines, and the carrier has now made that announcement to employees. The company’s first-ever mass layoff will be cutting 15% of corporate staff, totaling 1,750 people, to save an annualized $300 million.
CEO Bob Jordan, Credit: Southwest Airlines
According to an internal memo shared by aviation watchdog JonNYC, Southwest CEO Bob Jordan says they’re at a “pivotal moment” in carrying out their… “three-year business plan.” It’s the most heartless way to open this message. They aren’t describing a company on the brink making difficult and painful decisions. Instead they must “reduce duplicative efforts, and have a lean organizational structure” and must “maximiz[e] efficiencies” and [reduc[e] costs.”
They are closing the headquarters building and sending people to remote work. And tomorrow staff will find out via zoom if they still have jobs. Those who don’t will be paid through April. Tuesday morning will be basically this scene from Up In The Air.
— JonNYC (@xJonNYC) February 17, 2025
Blocking staff from the building and mass firings over zoom seems like the least ‘Southwest Heart’ move, ever. But they’ve already eliminated employee rallies as part of cost-cutting.
The airline surrendered to Elliott Management, and has begun selling planes to raise cash to fund stock buybacks. Yet the airline’s stock is flat since the activist investor took a stake and since they crossed the threshold of 10% owners. Transforming the carrier to become more like JetBlue and American, with assigned seats and extra legroom and a renewed focus on cost, turns out not to be a recipe for confidence in future earnings growth.
In short, Bob is being forced to cut headcount due to his lack of vision and missed opportunity to enhance revenue and profit margins by failing to offer what all other domestic (even ULCC) airlines have for decades, including business seats and/or premium economy with expanded legroom and priority/assigned seating for those willing to pay for it. He’s a true visionary.
Anyone who knows anything about the history of Southwest Airlines and the reasons for its success will understand that this is a pivotal moment in the company’s history and the beginning of a long, slow decline. Assigned seats is a good idea. Investing in technology, which was shortchanged in the past would be beneficial. Weakening the balance sheet and destroying employee morale will cost them big time. Elliott will be long gone when we see the damage and on to destroy the next company. A sad day for Southwest.
Why didn’t senior management just say “no” to Elliott and go down in a proxy vote? If their traditional strategy was the best they would have been proved right in time (maybe 2-3 years).
Vindication
Pretty heartless way to get rid of people, this is not like the old Southwest that is for sure, that culture is gone, since the federal govt. is getting rid of people in a similar manner they probably figure many people won’t even notice this going on expect those directly affected. To borrow part of an old Southwest commercial “You are now free to get another job”.
Surprisingly crass way to go it.
Employee morale was a big asset of theirs, I’m not so sure it will continue to be.
We’ll see how they recover from the next meltdown
“we will get through it together”… or separately.
It has been a rewarding 25+ years flying Southwest. All good things must end. As a customer, I expect to pay more and get less in 2025 and 2026.
beyond brutal.
WN’s employee count in 2019 was 60K and 72K now.
Cutting 20% of roughly 10K leadership corporate employees means that 15% of the company was in leadership or corporate positions.
The amount of words I can not say publicly.
After the holiday meltdown, I’m not sad at all that I don’t work at SW anymore.
I have loved Southwest for decades and I am 73 years old. They have the greatest staff with the best attitude. I and my family members can tell you story after story of great customer service. My wife and I still fly them every few months. Their ticket prices are often higher than their low cost competition, but their policies are the best in the business. They run a big and complex business. I cannot believe these cuts are necessary for anything other than to boost stock prices. Not a good thing for employee morale.
Beyond sad.
Southwest was the last US airline to do right by their customers (aka Guests), employees, suppliers and stockholders.
Now it appears that the only ones who matter are the stockholders (ok, the executives too as im quite confident they won’t suffer).
I just hope a new maverick can grab the torch and build another airline that operates the way Southwest used to.
Got to pay for the flight attendant and pilot raises somehow. I’m sure those who lose their jobs will be thankful that the aisle donkey and pilot ilk got their raises. Within 6 months I’d say we’ll see some stations close and more layoffs.
Enjoy telling a $15/hr ramp or gate agent that they’re now unemployed because the pilots wanted 300k instead of 200k
They say all good things must end. I have been flying Southwest regularly since 1988 – I can see that this will end. The grinning moron depicted needs his smile adjusted – this is nothing to smile about. Another airline ruined by greed.
In all honesty, most businesses can cut 15%+ of their staff. If done even moderately well, customers won’t notice a difference. I suppose, given the nature of airlines and problems/delays cascading for days, we’ll see a few rough patches ahead. However, most people shop by Price and Total Travel Time.
It seems as if the passengers who like Southwest seating will no longer have a reason to be loyal to Southwest and with the ticket prices being high, there will not be reasons for a lot of potential passengers to move to Southwest. I place the blame on the management for not being able to solve the Jetway Jesus problem, which disgruntled enough passengers that they switched airlines. Southwest is on the road to becoming just another USA airline but without the higher profit seats in the current cabin configurations. Maybe they could go to ULCC standards.
Sounds like Elon Musk bought SWA!…. I probably shouldn’t kid, we are entering a new era of additional stress on an already understaffed agency that being the FAA. ….. what they don’t understand is the trickle down effect these actions have on the remaining employees, whether the FAA or an airline that prided itself on never laying off people. The traveling public should be aware that their flights are being controlled by a somewhat demoralized or at least distracted Air Traffic Controller and I suspect the normally upbeat attitude of the SWA employees will take a hit too.
It never ceases to amaze me how much leadership in corporate America does not understand that layoffs to “drive efficiency” actually causes productivity of those who do not get laid off to decline worse than the savings generated by laying off those individuals.
Research has found that these decline in productivity effects often last over 2 years.
If I were a gambling man, Elliot seems to be saying, “We don’t care, we will still sell our product, so who cares about frontline employees?”
Complete gutless. Bob Jordan should be ashamed. He chose to protect his own job over those he swore to protect and serve.
The worst part is that Jordan will eventually receive a golden parachute once Elliott has no more use for him. Utterly shameless and despicable.
Herb is rolling over in his grave.
@CHRIS — Once again, you attack the workers—yet they are not to blame. You really are a one-trick pony. Scab!
Look no further than the rampant stock manipulation—$1.5 billion in buybacks over the last several years. That ain’t the workers fault. Nope. That’s the majority shareholders gutting a decent company, harming workers and passengers, alike. Sure, a few executives get nice bonuses, but everyone else suffers. So, bootlick if you must, but you’re blaming the wrong folks. They’d better be paying you to shill so hard; if not, you’re missing out.
1990
you do realize that WN’s employee count increased by 12,000 people between 2019 and 2024 while WN’s ASMs increased only 7% and its profits plummeted.
It was management that hired all of those people that clearly weren’t producing even seat miles – let alone revenue – at the level that WN was doing before covid.
Yes, mgmt made those decisions but alot of people had a job for a period of time that was in excess of what WN needed.
how it is being undone is beyond difficult to comprehend but WN was clearly overstaffed.
So sad to see….
What a terrible way to handle this.
Good riddance… This is simply reducing excessive management bloat that had been added relatively recently.
And the reality is that the market simply doesn’t need the (old) SWA model any more. So it’s a healthy reset.
@Tim Dunn — Respectfully, crews are not the problem here.
On cost, we already know that generally commercial aviation is combination of fuel, equipment, labor, maintenance, and airport charges. Of course, some airlines make bad bets. Some do stock buybacks when they should be hedging against risks like continued inflation or a decrease in demand for air travel.
In the past SWA, did a fantastic job with its fuel futures contracts, and limiting exposure on equipment by only operating 737 aircraft. But, as we’ve discussed before, the pandemic and then inflation really hurt them and everyone in the industry. Yet, SWA ratified its employee contracts, so why should corporate get to renegotiate when their ‘bet’ didn’t go as well as they hoped. Shouldn’t the shareholders pay the price for their greed, not the workers or the passengers?
Either way, it seems there are macro issues at play here, beyond SWA, and if they fail, it could be the start of several other downfalls in this and other industries. Is this government ready to help the people for once, or are we all on our own yet again while the rich get bailed out?
Southwest in large part is why we have the Max mess. So now, with no 700 series replacement coming soon, the model is broken.
Ironically Alaska has shown the way by acquiring weaker small airlines for thier fleet.
An acquisition or merger is in the works
Gary Kelly is to blame for all or most of this plus Bob Jordan is no Angel in this either. Arrogance and Conceit by these 2 along with other Southwest Airline Leaders brought them to this situation. I am predicting that Bob Jordan will retire by June and will receive a Supersized Golden Parachute. When Herb Kelleher left Southwest a short while later the Southwest Airlines Culture Flatlined . Southwest has ignored its employees and customer base for a long long time. Karma is what got Southwest Airlines.
@Dan — Thank you for appropriately blaming leadership, not the workers, for once—folks at the top got greedy yet again. Sacrificing some workers might make a few shareholders feel better for a brief moment, but it doesn’t solve any underlying issues. We are desensitized in the US to instinctively ‘punch down’ instead of ‘build up.’ This mistreatment should be enraging to anyone who isn’t directly benefiting from the abuse.
“closing the headquarters building and sending people to remote work.
I thought the business gurus were driving wage slaves Return-To-Office?
Elliott Management is just doing what hedge funds do; buying up a business that’s not quite as successful as it once was, then selling it off – piece by piece. Gordon Gekko crap. I could see this coming from day once of Elliott’s attempt to buy a seat in the boardroom and I knew it wouldn’t end well. Yeah, yeah, it’s all for the shareholders. Isn’t that what they always say when they’ve ruined a business, a community, people’s lives? WN would have been fine without them; they could have recovered just fine. But now they will be destroyed. Greedy P’s OS they are at Elliott.
I’ve very anti-socialist. But I have to admit that this is the dark side of capitalism. Taking perfectly legal means to screw people over and line your own pockets. It really is evil.
@BigTree —But, but…those gurus say it’s for ’EfFiCiEnCy’ and to ‘mOvE fAsT aNd BrEaK tHiNgS’ while stealing from the workers that they refer to as lazy, selfish, and so entitled.
There should be a backlash for the systemic mistreatment of workers. I hope this 2nd Gilded Age end soon and a new Progressive Era follows. *holding my breath*
@AngryFlier —Unless there is a new Red Scare, don’t worry about those silly labels…even mainland China is ‘communist’ in name-only—they’re a totalitarian authoritarian government with late-stage capitalism, kinda like where we’re headed in the US, except the trains actually run on-time in Beijing. Of course, our American oligarchs will continue to rob us blind while distracting us with ‘culture war’ nonsense—thanks President Musk! Did ‘DEI’ ruined SWA?! /s
I wonder if anyone will become disgruntled? Unemployment is still very low so finding another job won’t necessarily be hard. I have been on unemployment before and it barely paid the bills but at least I didn’t have a mortgage and was able to rent a room from a friend. I was able to take my time finding a much better job than the one I left. In fact, I found two and the second one became the career job.
Notice that the business offices will be closed the day the employees receive their termination notices.
Must be the Luigi Mangione effect!!
angry,
with all due respect to WN, Elliott got involved because LUV stock so substantially underperformed not just DAL and UAL but also where LUV had been relative to the industry.
For years, WN was the most consistently profitable and highest market cap airline stock in the world. By the late 2010s, DL overtook WN for many of those metrics.
DL recovered far faster and greater than WN and UA joined DL with its stock doing better than most airline stocks because UA (like AA) was so undervalued.
activist investors act because they see opportunity. Elliott and many people believe WN is a good company with great assets at its core. Many of its employees have said for years that WN leadership missed many opportunities for improvement.
These are painful steps but turnarounds always involve not just coming up w/ new strategies – like assigned seats and extra legroom seats but also cutting unnecessary costs.
1990,
We don’t know if WN is overstaffed because we don’t have the data but it is very possible that they have excess crews just as they did with management.
It is much more difficult to lay off union employees so WN’s focus is on corporate which needs a permanent reset.
Yes, WN hired too many corporate employees and some of those people will have to get jobs after a few years or less of working for WN.
WN is trying to become a lot more efficient and it has to stop at the top.
Also, Bo Jo might be saving his job but a number of VP positions are being eliminated.
Perhaps their focus on being the cattle-car, Greyhound bus of the skies was a poor business model.
Southwest is not an ULCC and never successfully counteracted their introduction into the market place. Yet the airline doesn’t have lucrative premium fares and has steadfast not charged for checked bags. Layoffs aren’t probably the real answer, that’s just what the MBAs do when they don’t have an easy solution.
Eventually, and probably sooner rather than later, Southwest will announce a merger and hope to get regulatory approval.
LUV stock was trading higher in 2014 than it is today. Management hasn’t delivered value for Southwest’s owners and the company’s headcount has become bloated. Poor management choices led Elliott in the door and able to get fellow shareholders on their side.
@Tim Dunn – Southwest has had problems, that doesn’t mean Elliott has solutions. Southwest’s stock has continued to underperform even as Elliott has shifted the company. And a model of ‘let’s be like JetBlue but not as nice’ isn’t an obvious financial winner. Nor is the data very good on share buybacks.
My hypothesis continues to be that they largely maxed out the business model of one aircraft type, no partnerships, domestic and short-haul international only – and that as they grew they became insular and ossified. This became even clearer as the pandemic accelerated shifts in consumer preferences.
What that means is that Southwest was not, could not, regain its previous valuation multiples even if they’d been faster to attack their problems. But their failure to do so doesn’t mean the Elliott playbook is close to correct.
Too bad WN couldn’t get ahead of it…freeze open position, offer early retirements or “stand in stead”, etc. For a company that has never done mass layoffs, this will forever negatively change the culture. The beatings will continue until morale improves.
Gary,
WN’s problems didn’t develop overnight and the solution will not be rolled out overnight.
This latest move on the cost side had to be part of what Elliott identified. They just discussed the revenue issues openly.
We don’t know if what has been proposed will work but I haven’t read any better comprehensive plan to turn WN around
Well, I’m rooting for the airline, the crews, and the passengers, and could care less about the hedge fund and their excessive profits that often come at the expense of everyone else. Companies like Elliott often insert themselves in otherwise ‘fine’ businesses, blame whomever they can (you lot didn’t meet our arbitrary ‘performance review’ so you’re fired!), then exploit as much money as they can, before leaving it bankrupt. These guys are parasites—it’s not a ‘new’ game that they’re playing here. It’s just sad that it’s happening to a once-beloved airline. Yet, here some of us are, even considering that maybe it’s those pesky unions (how convenient). Guys, it’s not the workers’ fault (stop the bootlicking). Follow the money!
Elliott will milk SWA dry, scooping up and selling every asset the airline has and sending all that cash to shareholders as “dividends to improve shareholder value” …Now we can all watch SWA as it slowly dies! Terrible!
Gary referenced the scene from Up In the Air (one of my favorite movies).
But the scene I keep thinking about is Gordon Gekko buying Blue Star Airlines and wrecking it on Wall Street. He told Bud Fox “I decided to wreck it because I can.”
@Disgruntled American – See also https://viewfromthewing.com/elliotts-wall-street-playbook-revealing-the-hollywood-style-moves-behind-their-plan-to-gut-southwest-airlines/ 🙂
@1990
You are 3 for 3 with your comments.
I disagree with a lot of what you say, but when you’re right, you’re right.