Southwest Airlines announces first layoffs in its 53-year history

Dallas-based Southwest airlines just announced mass layoffs — the first in its 53-year history.

The company is cutting 15% of its workforce, primarily its corporate staff, many of whom are located in the Dallas area. 

Alison Sider, who covers the airline industry for the Wall Street Journal, said these cuts are not impacting pilots, flight attendants or other frontline workers.

“But they will affect headquarters, staff and people in those corporate functions and within leadership,” she said. “And the big reason is that Southwest really wants to cut costs, because it had hired pretty aggressively in the last several years. And CEO Bob Jordan has said that the corporate workforce has expanded more quickly than the rest of the airline, and it felt it needed to rein in costs. It’s under a lot of pressure from investors to do that to improve its financial returns.”

The layoffs are part of a larger transformation plan, Sider said. 

“It’s upending many of the things that people identify most closely with Southwest, like its open boarding policy, open seating policy – where it doesn’t assign seats,” she said.

“Southwest has always been seen as pretty egalitarian. It doesn’t have first class. Every seat is basically the same. And that’s going to change. There are going to be rows with extra legroom that will come with a premium price tag. And those are efforts that are really geared towards bringing in more revenue.”

But those changes are not going to be in place for a while, and in the meantime Southwest is also looking at ways to operate more efficiently, Sider said. 

The airline also announced Wednesday morning that its chief transformation officer, Ryan Green, will step down from his role in April.

“All we know is what the airline has said. And they did say the mass layoffs are also going to include some very senior positions,” Sider said. “We don’t know if Ryan Green’s departure is among those. But it did come the day after this announcement.

Southwest faced a battle last year from a really aggressive activist investor that wanted to see some big changes at the company… And it ended in a big truce where Elliot, the activist investor, got a number of seats on Southwest’s board and has significant sway at the company now.”

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In some ways, Southwest is facing some cost pressures that a lot of other airlines are facing. But the airline also has unique challenges, Sider said. 

“There have been some pretty expensive new labor contracts signed in the last couple of years coming out of COVID. I think all the airlines are facing inflationary pressures,” she said. “But I think the feeling at Southwest has been that its hiring had gotten out of hand and needed to be reined in. And it seems to have particular trouble kind of in the new travel environments.”

Part of this is because over the last few years, travel preferences have shifted away from Southwest’s business model, according to Sider.

“There’s been a real trend towards more interest in premium travel and upselling and buying up. That’s been a really successful strategy. Long haul international travel has been really successful,” Sider said. “And those were areas where Southwest just didn’t have a lot to offer.

So that’s what’s driving a lot of the business model changes and the revenue strategies. And it’s also putting more pressure on Southwest to address costs.”

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