Southwest Airlines makes harsh move amid alarming consumer trend

Over the past few months, Southwest Airlines (LUV) has been determined to hit the reset button after facing several significant challenges impacting its finances.

In late 2023, the airline was ordered to pay a $140 million civil penalty after it sparked chaos by canceling more than 16,900 flights during a winter storm in 2022. Before facing the penalty, it had already refunded $600 million to the roughly 2 million passengers affected by the cancellations.

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By 2024, Boeing began to suffer from quality and safety issues with its 737 Max jets, which further dented Southwest Airlines’ finances, especially since the airline only flies Boeing 737 aircraft. During the first quarter of 2024, Southwest Airlines reported a net loss of $231 million.

Related: Southwest Airlines makes a harsh cost-cutting move

Southwest Airlines’ stock price has shrunk by roughly 6% over the past year and has declined by 26% in the last five years.

A Southwest Airlines plane is seen at an airport terminal. 

Image source: Robert Alexander/Getty Images

Southwest Airlines kicks off a harsh change

Amid these setbacks, Southwest Airlines CEO Bob Jordan warned employees in a memo in January that the airline was freezing corporate hiring and promotions in an effort to cut costs. He highlighted in the memo that “every single dollar matters.”

The following month, Jordan announced that the airline would soon lay off 1,750 corporate employees, which is 15% of the airline’s corporate workforce. The job cuts will include senior leadership and directors.

Now, it appears that those job cuts will begin on April 22 and are expected to be permanent. According to a recent WARN notice, the cuts will specifically target corporate employees located at Southwest Airlines’ headquarters and maintenance facility in Dallas, Texas.

Related: American Airlines is cracking down on major customer complaints

About 630 job positions, including project managers, technology analysts, and auditors, were flagged in the notice.

When Southwest Airlines first announced the job cuts in February, it highlighted that the decision was “unprecedented” in its 53-year history.

“This decision is unprecedented in our 53-year history, and change requires that we make difficult decisions,” said Jordan in a February press release. “We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization.”

The airline’s decision to shrink its workforce is part of its three-year “transformational plan” that it expects will generate $500 million in cost savings by 2027.

Southwest Airlines faces a major threat as consumers shift gears

Southwest Airlines’ job cuts also come during a time when domestic air travel is facing a significant decline, which poses a major threat to the revenues of airlines across the country.

U.S.-based travel agency air ticket sales declined by 8% month-over-month in February, according to recent data from Airlines Reporting Corp. For U.S. domestic trips specifically, ticket sales declined by 10% month-over-month.

“U.S. travel agency air ticket sales are reflecting the overall demand volatility seen by airlines,” said Steve Solomon, chief commercial officer at ARC, in a recent press release. “Macroeconomic trends are creating a more dynamic environment for consumers, businesses, and airlines in the short term.

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Many consumers have been tightening their spending amid concerns over President Donald Trump’s latest round of tariffs.

Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price increases.

As air travel declines, Southwest Airlines now expects its revenue per seat mile for the first quarter of 2025 to spike by only 2% to 4% year-over-year, which is less than its previous guidance of a 5% to 7% increase.

The airline claimed in a recent SEC filing that the new guidance is partially due to “less government travel, and a greater impact from the California wildfires than originally estimated.”

“The remainder of the decrease is primarily attributable to softness in bookings and demand trends as the macro environment has weakened,” said Southwest Airlines in the filing.

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