Southwest Airlines (LUV) , the fourth-largest airline in the U.S., is on a strict road to recovery after facing significant reputational and financial headwinds over the last few years.
In December 2022, when a major winter storm caused travel disruptions, Southwest Airlines was forced to cancel over 16,900 flights, leaving more than 2 million travelers stranded.
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The airline refunded $600 million to passengers who were affected by the cancelations, and in late 2023, it was ordered by the U.S. Department of Transportation to pay a $140 million civil penalty for the incident.
Related: Southwest Airlines makes a harsh cost-cutting move
To add to the financial strain, Southwest Airlines, which only flies Boeing 737 aircraft, had to dramatically reduce its delivery expectations from Boeing last year as the planemaker suffered quality and safety issues with its 737 Max jets.
By January this year, Southwest Airlines was also hit with a federal lawsuit for allegedly “operating multiple chronically delayed flights.”
The airline has seen its stock price decline by about 11.5% over the past year, and in the last five years, its stock price shrunk by almost 48%.
Southwest Airlines announces a harsh decision
Amid these recent challenges, Southwest Airlines has decided to make a historical cut to its workforce in an effort to create a “leaner and more agile organization,” according to a new press release.
The airline announced it will be laying off 15% of its corporate workforce, which includes senior leadership and directors. The decision will affect 1,750 employees.
Bob Jordan, president and chief executive officer of Southwest Airlines Co., said in a statement he is working to make the company more agile.
“This decision is unprecedented in our 53-year history, and change requires that we make difficult decisions,” said Southwest Airlines CEO Bob Jordan in the press release. “We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization.”
In September last year, Southwest Airlines announced a three-year “transformational plan” that it expects will generate $500 million in cost savings by 2027.
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The plan includes “minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities, and improving corporate efficiency.”
As a result of the recent round of layoffs, Southwest Airlines estimates that its partial-year 2025 savings will be $210 million, and its full-year 2026 savings will be $300 million.
Southwest Airlines recently turned heads with major changes
The move from Southwest Airlines comes after a report from CNBC last month revealed that the airline has halted corporate hiring and promotions.
The company also paused many of its internships for summer 2025 and opted to skip a few employee team-building events that have existed since 1985.
In a memo sent to employees announcing the changes, Jordan said that “every single dollar matters.”
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“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,” wrote Jordan in the memo. “A key risk in 2025 is acting as if the urgency has passed and therefore not sustaining the focus and energy from 2024.”
Southwest Airlines also announced last year that it is reducing its service in Atlanta, cutting 300 pilot and flight attendant positions by April 2025.
In addition, the airline recently doubled down on attracting more customers by adding assigned and premium seating to its aircraft and updating its boarding process to make it more efficient. It also vowed to maintain its bag policy, which allows customers to check in two bags for free.
“We’re now ushering in a new era at Southwest, moving swiftly and deliberately to transform the company by elevating the customer experience, improving financial performance, and driving sustainable shareholder value,” said Jordan in a September press release.
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