Southwest Airlines is preparing to layoff 1,750 employees as part of its latest effort to cut costs and juice profits. But what is really going on at Southwest? Is Elliott Investment Management maliciously pulling the strings or are these job cuts reasonable?
Southwest Airlines Layoffs: First Time In Company History
Southwest plans to layoff 1,750 employees, about 15% of employees in corporate or leadership positions. The job cuts will result in estimated savings of $210 million in 2025 and $300 million in 2026. This represents the first-ever mass layoffs in the company’s history.
On February 17, 2025, an internal memo was sent to employees by CEO Bob Jordan:
We are at a pivotal moment as we carry out our three-year business plan to transform Southwest Airlines.
As we continue to transform our Company, we must ensure we fund the right work, reduce duplicative efforts, and have a lean organizational structure that drives clarity, pace, and urgency.
We must improve how we work together, maximizing efficiencies and reducing costs. To achieve this goal, we have made the difficult decision to reduce our workforce, almost entirely in Corporate and Leadership positions. At 4 p.m. today, I will send a message to all Employees sharing this news and outlining next steps.
This is a challenging shift that will be difficult for all of us, and we are focused on treating our People with care and respect throughout this process. Beginning at 6 p.m. today, the main Headquarters building (HDK) will be closed, and Noncontract Employees who work at the Headquarters Campus and aren’t required to be on campus for operational or training purposes will be instructed to work remotely. TOPS and Wings will remain open for functions neccessary to business continuity, like the NOC and required training.
Tomorrow morning, Noncontract Employees will receive appointments for virtual meetings in which they will be given more information about their employment status. Most Employees impacted will no longer work for the Company but will remain employed by Southwest until late April. During this time, impacted Employees will continue to receive salary, benefits, and a bonus (if eligible), as well as resources to help answer questions and prepare for the future.
I know this will be hard, but we will get through it together.
That last sentence is objectively tone deaf…easy for Jordan to say to employees who are about to lose their livelihoods…
A publicly posted memo earlier today was longer and included gentler wording, suggesting that the airline is getting back to its roots with this downsizing…
This was an extremely difficult decision to make because of its impact on our People—both those who will be directly impacted and those who will remain.
Changing how we work is an essential part of becoming a more agile Company, and it will be a journey. We are building a leaner organization with increased clarity regarding what is most important, quicker decision making, and a focus on getting the right things done with urgency—not unlike our entrepreneurial founding spirit of the 1970s. As we focus on delivering on our plan, our future will be built upon the actions we take today to ensure an even brighter future.
Employees are being informed via remote video calls whether they are still employed.
I’m Not Prepared To Opine On These Job Cuts…
Regular readers know I’m very happy to opine on most issues. Here, I’m just not sure.
I wonder sometimes if my hatred for Elliott Investment Management isn’t obscuring a move that makes sense?
For all I hear about Herb Kelleher rolling over in his grave, I also wonder whether Southwest may have had too many management positions?
I simply don’t know…so I cannot support or condemn this news without more information.
Whether that be the case or not, this whole situation appears to be upending the business model that Southwest pioneered of placing employees first and banking that profits would follow. Maybe there are too many employees at the top, but would natural attrition not be a better way forward?
As Southwest prepares for a $750 million stock buyback, I do find myself shaking my head in disbelief.
I believe that Elliott is perfectly willing to destroy Southwest Airlines for short-term gain. The sad thing is that Southwest’s stock price is not rising and it’s not even like Southwest was unprofitable in 2024: the idea that you have to overturn everything that works to juice up profits strikes me as about as stupid as mass layoffs due to “fraud” to fund another round of tax cuts for those who don’t pay enough already…
Oh goodness, I guess I opined anyway…
CONCLUSION
Southwest is laying off 1,750 workers, marking the first mass-layoff in company history.
The story of an outside firm (here, Elliott) taking a hostile ownership position and then strongarming the company into hasty changes that inflate the stock price in the short-term at the expense of long-term growth, happy employees, and satisfied customers is nothing new. In the next chapter, the outside firm walks away with a huge profit on their “investment” while leaving the company in a far weaker position.
I believe this is what Elliott wants to accomplish. We see it playing out already with the looming stock buybacks.
But at the same time, I’m not saying Southwest was not top-heavy or some of the jobs were redundant. I just don’t see any carrier that has been successful in cutting its way to long-term growth and profitability.
Southwest should think twice before it abandons what made it unique, though. People will not pay a premium for a carrier that does not offer something special, like the sort of folksy service that made Southwest one of the most storied airlines in the history of aviation. Yes, it still matters.
1,750 Corporate/Management salaries is a drop in the bucket compared to the salaries of pilots. This is sacrificing the livelihood of 1,750 people in order to let Bob Jordan keep his job (not saying the next CEO wouldn’t do this either, though).
Elliott may very well be transforming Southwest into a traditional carrier to make it more appealing for acquisitions. The only way they win big with their investment is a material change to the industry, which in my opinion would be consolidation. Change Southwest to look more like Jetblue, Spirit, Frontier, Breeze, etc. Then acquire one or two, reap the benefits and cash out while consumers pay more for airfare.
They did these via videochat, not in person, banning everyone from headquarters. And the messaging isn’t “we’re in an existential fight for our lives” it’s “we’re not optimizing financial performance.” The narrative here is terrible.
And while the organization is top-heavy, they probably didn’t need to do this? They already have a hiring freeze. Natural attrition gets them to these numbers in 12-18 months. So it’s not a recurring $300m savings, it’s a one-time pull-forward of the savings. Is it worth it?
Now everyone is looking over their shoulder. As one employee puts it to me, “I’m not convinced this is the end of the layoffs, and even though my team was not affected, this company is going to be very different going forward, and not in a good way.”
They no longer run on Southwest Heart. Southwest had changes it needed to make. It probably maxed out its business model (one plane type, domestic and short haul, no partnerships and little product differentiation). Changing that entails costs, but consumer preference changes were accelerated by the pandemic. All inevitable stuff, and Southwest didn’t react quickly enough.
But none of that means that aping JetBlue but not as nice, or American, is a great financial strategy. Remember that Southwest shares haven’t appreciated since Elliott invested, or hit a 10% stake. The company capitulated, even announced plans to sell planes and lever up its balance sheet to fund buybacks, and that hasn’t helped. (The literature on buybacks is clear that there’s not much of an appreciable long-term bump to share price – at best it is modest and short-lived, benefiting those selling into the trading window.)
Bottom-line seems to be that what has made Southwest special is mostly behind us. And these layoffs are one sacrifice Bob Jordan is making to try to keep his own job.
The way they did this is horrible. It has Bain written all over it.
I’ll give an example… one person I know impacted said they are one of 9 people with their exact same job title (a Manager position at HDQ) and two of them are being eliminated. Not just same job title but within the same department and they all sit in a row.
@Neds … Please share with us generally what is their area of management ? For example : accounting , scheduling , purchasing ? We are somewhat in the dark about this .
Writing procedures/manuals for an operational group.
Also WN went through airport and inflight leadership and eliminated a lot of airport supervisors, inflight base leadership, airport asst managers as well today (including gutting ATL again, just a month or two after they did the agents).
I intensely loathe the greedy shortsightedness of corporate raiders and Elliot is living up to the billing in full.
@Christian … Agreed … Yet , usually , companies are overburdened with managers .
@Gary makes a great point in the comments that about a year’s worth of attrition would have naturally done the same thing without destroying morale.
I also talked about natural attrition in my post! 😉
Apologies. Sometimes it’s easy to get fixated on the comments and lose track of the article itself.
They are vultures
Matt: you are exactly right. “Maybe there are too many employees at the top, but would natural attrition not be a better way forward?” Of course that is the right way to do it. Elliot is Mr. Short Term. Do we think he cares about employees or employee attitudes. You can conquer any foe with a dedicated, engaged group of employees. Have the employees turn against you, you WILL fail.
Layoffs are frequent in the airline industry, but most are played out relatively quietly. This seems to be done to attract attention so that Elliot know the CEO is tough on costs. BS!!
WN had a winning formula, it needed only tweaking, not neurosurgery.
They could have at least hired George Clooney to do it in person and reenact his character from Up In The Air.
If you love the government so much, write them a check. Don’t use the violence of government to force others. The US treasury accepts gift payments if you’re hungry for the boot.
Not sure what you are referring to.
Pretty sure he was referring to this:
“the idea that you have to overturn everything that works to juice up profits strikes me as about as stupid as mass layoffs due to “fraud” to fund another round of tax cuts for those who don’t pay enough already…”
And as someone who falls in the category of people targeted by Biden and his political party the last 4 years of “those who don’t pay enough already”, I can tell you affirmatively, the assertion that I (or my similarly situated clients) don’t pay enough already is categorically untrue.
Ok, mosh.
Prove it. Give us numbers. Actual. Real. Numbers. Gross income, tax paid, marginal rates, and total tax as percentage.
Then list occupations with those numbers.
Then EXACTLY which laws/ policies “targeted” you and clients. With impact numbers. Show it year over year
Otherwise, you’re full of it
You want numbers? You won’t care about them, but I’ll give you numbers.
If you actually bother reading Biden’s tax proposals, they defined “millionaires and billionaires who don’t pay their fair share” as any single person earning more than $200k or married couple earning more than $400k.
I’m a CPA. I’ve done taxes for a living for 23 years. I (barely) cleared $400k last year. I’m going to end up paying the IRS somewhere around $125k. 30% give or take. Most of my clients are in professional services and fall somewhere in the $400k-700k range. Most of their effective tax rates fall somewhere between 25% and 30%. Those who pay lower rates do it through junk like accelerated depreciation and various special interest tax credits. Guess where those breaks are going? Nowhere, because the grifter politicians have no problem bestowing corporate welfare on their benefactors.
The hedge fund barons with their carried interests? The big corporations that pay 10-15% effective rates? Sure, that’s a valid argument. But guess who the Silicon Valley moguls and big corporate CEOs give most of their campaign cash to? That’s right, Democrats, so the wailing you hear from Elizabeth Warren and Bernie Sanders is nothing but performative art.
I was going to engage you a bit more politely than RPC after your first comment, but had a feeling this would be your response.
Please understand that I am not referring to people like you (or me) in similar positions. I am referring to exactly the vested interests that you point out. When billionaires are paying an effective rate lower than their janitors or secretaries, there is something very wrong with the system. If Trump wants to drain the swamp, let him start by ending all these loopholes and hiring IRS agents to enforce it. He loves talking about “fair” but when it comes to taxes, there’s a big problem in this country in which far too many pay nothing at the low end and the high end. The answer, though, is not a new round of tax cuts. It is closing loopholes and making sure that there are no free riders. It’s time to address the budget deficit and annual debt. For a man who is disrupting all conventional wisdom, how about he focuses on fiscal discipline and not spending money we don’t have?
Finally, remember who sat around Trump during the inauguration. The Silicon Valley moguls may have found it expedient to support more liberal causes and candidates in the past, but those days are over. Those grifters will kiss the ring in hopes of financial benefit.
@MeanMeosh … A tip of the hat to you . Meanwhile , every mediocre untalented politician gets rich , whilst generating hot air . Interesting how that can happen . Elon is merely at the tip of the iceberg . Cheers .
@Matthew … Yet Tax Cuts are Very Important for some people . For example , ministers and clergy are frequently (usually ?) “Self=Employed” for the purposes of taxes . Also many other “Self-Employed” service providers with a variety of tasks . During Trump’s first term , he caused to be enacted a discount for “Self-Employed” people , which is going to expire this year . If this is not re-enacted , many of the lower paid people will pay higher .
So , Tax Cuts are really Needed by some people , including the charitable ministers and clergy .
The biggest problem was the elevating of taxes to pay for a bloated bureaucracy and to keep the extra lobbyist income flowing for the elected officials . Musk is exposing all this , and the Dems are squealing in agony .
Sorry to engage “impolitely” , meanmosh but despite your response- “that dog don’t hunt”. So I call it out when I see it. You see, I love numbers and details, but I see you don’t include some key ones….
Nobody proposed “massive” tax rate increases on people making 400k a year- the tax increases start there and go up with income, with increasing taxes on exponentially higher incomes. You didn’t include those numbers. Feel free to cite the exact proposed rates by income, I know you have them. Also let’s not ignore how much income gets taxes as non- work income (cap gains, etc) at those levels of income. Or some proposals just take the cap off social security taxes.
You paid 125k on “barely” 400k income- sorry, that math doesn’t work out. If single, about 100k. If married, about 75k. Unless you’re adding in state, local, etc taxes and self employment taxes. So, for the 700k clients- max 25%, more likely around 20% of total income paid to the feds, usually without much tax management creativity.
And your clients making 700k and paying 25% of their total income as tax? What EXACTLY is your fair target for those folks? What is the correct total tax rate for that kind of income in a system that’s designed to tax at progressively higher rates? Unless you want people making 60k total household income to pay that also… like a flat tax for everyone?
And the folks saying “The top 1 % make 30% of income, but pay 40% of federal taxes”….. sounds like that’s not a terribly progressive (in terms of rates) tax system; should people on the bottom of the rung be paying the same as those in the 500k+ range on marginal dollars? I’m not sure that’s a massive tragedy to be so darn close.
I do however strongly agree with the points about “loopholes” such as when almost all of a massive income is capital gains, carried interest, advantaged by step-up bases, etc. Can’t argue with you that needs to be changed
New names, same script.
Think back to TWA and Carl Icahn. Now substitute SWA for TWA and Elliott for Icahn.
The idea to take advantage of an airline in distress via seats on the board; and to strip it of as much cash as possible via sale of slots, lease back of airframes, and down sizing of staff.
Carl tired this recently with JetBlue, but realized there wasn’t much to strip and ran away with minimal gains.
Not paying enough?
The 1% already pay 40% of the taxes! How much is enough> 100 percent?
Yes, some believe the top 1% should pay about 98% of income taxes.
The fact is that the top 1% own 30% of the nation’s income. They should be paying about 30% of taxes. In reality they pay over 40%.
In contrast, airlines award MORE miles to the elites when they should offer less, if the IRS tax code is a guide. Regular non-elites earn only 5 miles per $1 spent while elites might earn 8 or even 10 miles per dollar. It should be the reverse. If you are super duper elite, you get a luggage tag but 5 miles per $1 spent. Non-elites get 10 miles per $1 spent.
JFK is the one who lowered the income tax on the rich because it really was nuts at 90%. Now, at least in the USA, the rich whine no matter how little they pay. That’s why Warren Buffet continually gripes about how normal people get hosed while the rich just get richer. Why is Buffet’s secretary paying a higher percentage tax than he is? As a contrast, many European billionaires publicly complain that they’re not taxed enough. Compare that with weasels like Bezos, Musk, and Zuck who are impossibly rich but it’s still not enough. Bezos buys his girlfriend a yacht to go with his own and Musk is the richest man in the world yet he whines like a starved puppy about the prospect of actually paying taxes.
Far too many loopholes such that the effective rate is relatively lower. I have clients who pay so little in federal taxes it is disgusting.
My wife and I were in a Cap1 lounge a few months ago and there were a couple of guys in their mid-to-late 20’s next to us talking credit cards/points & miles. They were loud enough that it didn’t take eavesdropping to hear what they were saying. After a bit they segued into finance and one of them proudly proclaimed how he got some rich person 40 million dollars tax free. Even a couple of decades ago when I was making a fifth of what I do now I was willing to pay more in taxes to help our society. That’s still the case but it’s repulsive when the truly rich believe that they owe little to nothing to the society that made them rich in the first place.
why not enact a luxury tax instead of an income tax?
Tax and purchase excluding investment or real estate above 5oK at 25%, above 100K at 50%, and above 1M at 100%
Regarding your clients Matthew, maybe they paid so little in income tax due to maybe how they were paid – deferred stock grant vs cash. Or maybe deferred salary payments, like your friend Shohe and others on the Dodgers. But rest assured, various states like California are considering taxing unrealized capital gains like regular income. So if your home has gained in value since its purchase, YOU will pay state taxes based on that gain. Until then, I am sure you are like so many others (including super wealthy) who do all they can to minimize (legally) their taxes, right? Maybe, those FF miles and points should be taxable, to be fair to those who don’t have them. Just saying…
Elliott wanted corporate raiding and it appears to be in motion. What I do understand is Newton’s third law of motion. The pushback will happen.
Whether or not they’re doing the right thing, they’re definitely not doing it the right way. Ideologically speaking, I am not a fan of draconian employment protections which make it hard to dismiss employees who aren’t performing well, but that behaviour is so destructive that it makes one wonder about whether unlimited flexibility in hiring and firing really is conducive to a well-functioning labour market.
You said it all: Elliott walks away with a huge profit on their “investment” while leaving the company in a far weaker position.
Sick to see SWA “stock buybacks” of $750,000,000 as the company sells its planes and is mortgaging its future. That’s what “private equity” always seems to do to healthy companies.
If it’s true that natural attrition would have resolved this in 12-18 months then that’s a disgusting betrayal of their people. I must admit I doubt that though.
What’s unquestionably disgusting beyond measure is how they are handling this. Getting layed off virtually is bad enough but locking down HQ as if your employees were and angry mob of criminals bent on destruction that’s really insulting.
It’s beyond the pale.