What Is Really Going On At Southwest Airlines?

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.