KEY TAKEAWAYS
- Shares of Southwest Airlines rose in premarket trading Tuesday after the carrier said it plans to cut 15% of its corporate workforce, eliminating about 1,750 jobs in the first large layoffs in its history.
- The cuts are slated to be mainly completed by the end of the second quarter.
- Southwest shares have lost 10% of their value in the year through Friday.
Shares of Southwest Airlines (LUV) rose in premarket trading Tuesday after the carrier said it plans to cut 15% of its corporate workforce, eliminating about 1,750 jobs in the first large layoffs in its 53-year history.
The cuts are slated to be mainly completed by the end of the second quarter this year. They include eliminating 11 senior leadership positions of employees ranked vice president and above, the company said. Southwest’s shares were up about 2% in early action.
“This decision is unprecedented in our 53-year history, and change requires that we make difficult decisions,” Chief Executive Officer (CEO) Bob Jordan said. “We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization.”
Southwest Had Been Under Pressure from Activist Investor Elliott
Southwest said the cuts are expected to help it save $210 million this year and $300 million next year. It will incur a one-time charge in the first quarter of 2025 of between $60 million and $80 million.
Under pressure from activist investor Elliott Investment Management last year, the airline has already been restructuring its operations and strategy, including abandoning its famous open seating policy. Like its rivals Delta Air Lines (DAL), United Airlines (UAL), American Airlines (AAL), Southwest was profitable last year but that was mainly due to lucrative co-branded credit cards rather than revenue from transporting passengers.
The company earlier this month named a new CFO, Tom Doxey, a former United executive who had more recently been at Breeze Airways.
Southwest shares have lost 10% of their value in the year through Friday.