Southwest Slashes 15% of Its Workforce in Bid to Restore Profitability

Southwest Airlines will lay off around 1,750 employees this year, including members of the senior leadership, as it tries to cut costs and create a “leaner and more agile organization,” CEO Bob Jordan said.

The cuts, affecting around 15 percent of Southwest’s corporate workforce, will be the first mass layoffs in the company’s 53-year history. The job cuts are “difficult” and “unprecedented, Jordan admitted, but necessary.

Southwest has faced slumping profits in recent years, despite a post-pandemic travel boom, along with federal scrutiny and a record-breaking fine over a Christmas 2022 travel meltdown.

Activist Investor Intervention

Smelling blood in the water, activist investors Elliott Investment Management took a $1.9 billion stake in Southwest last summer and began pushing for dramatic change at the airline, which has long been known for its unique corporate culture and approach to commercial aviation.

Under pressure and with Jordan’s job on the line, Southwest unveiled a dramatic three-year turnaround plan in September. Under the tagline, “Southwest. Even Better,” it aims to save $500 million by 2027 by “minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities, and improving corporate efficiency.”

Photo: Courtesy of Southwest Airlines

The airline has already implemented a hiring freeze, paused its internship program, and suspended its decades-long tradition of team-building “rallies.”

In April, it will reduce service to and from Atlanta (ATL), cutting the positions of more than 200 flight attendants and as many as 140 pilots, although cabin crews have had the opportunity to apply to relocate.

Impact of Layoffs

The latest cuts will target the corporate workforce, which Jordan says has grown faster than the rest of the company.

“We must ensure we fund the right work, reduce duplicative efforts, and have a lean organizational structure that drives clarity, pace, and urgency,” Jordan wrote in a memo to staff announcing the layoffs.

Photo: Courtesy of Southwest Airlines

As part of the reduction in force, eleven senior leadership positions, including vice presidents and higher, will be eliminated.

The cuts will take effect in late April. Most laid-off employees will stop working now but continue to receive their salaries and benefits until then.

Southwest anticipates the job cuts will initially cost $60 to $80 million, including severance payments and post-employment benefits, before saving it $210 million this year and $300 million in 2026.

“Every single dollar matters,” Jordan said in the memo. “We made a lot of progress in 2024, and we have a lot of tangible momentum… but we’re still far from our goal of returning to industry-leading profit margins,” he wrote. “A key risk in 2025 is acting as if the urgency has passed and therefore not sustaining the focus and energy from 2024.”

Although Southwest’s Q4 2025 results, released in January, exceeded Wall Street’s expectations, much of that boost was from rising ticket prices, and the carrier’s annual net profit was flat.

Southwest Transforms Policies

Another plank of Southwest’s transformation is unlocking new sources of revenue. To maximize the use of its aircraft, Southwest launched its first five red-eye routes last week and has plans to operate up to 33 overnight flights per day by June.

Famous for its free-for-all seating policy, the airline will introduce assigned seats in 2026, with premium seats with extra legroom up for grabs for a fee.

Photo: Southwest Airlines New Cabin Interior. Courtesy of Stephen Keller / Southwest Airlines

Festival-style seating was once seen as a pillar of Southwest, a quirk that distinguished it from rivals.

However, the airline says it no longer matches travelers’ preferences: surveys found that 80 percent of Southwest passengers and 86 percent of the customers of competitors prefer assigned seats, especially on longer flights.

By failing to upsell passengers on better seats, Southwest was also leaving money on the table, according to Elliott Management. Southwest anticipates bringing in $1.5 billion in additional revenue from assigned seating fees by 2027.

Another of Southwest’s sacred cows was its resistance to mass layoffs. As recently as 2021, then-CEO Gary Kelly was boasting about the airline never having laid off or furloughed employees.

“It all leads up to a strong desire to take great care of our people and then, in turn, our customers. That’s why we’ve never had a layoff,” he told Yahoo Finance then.

But Kelly is now gone from Southwest, having been forced out of his position as executive chairman by Elliott in September. And Southwest is looking like a whole new airline.