Southwest Airlines 2025 Stock Surges as Company Announces Historic 15% Workforce Reduction, Saving $210M
Southwest Airlines shares jump in early trading following announcement of first-ever mass layoff plan to cut 1,750 corporate jobs, aiming to boost efficiency and save $210 million in 2025.
KEY POINTS
- Southwest Airlines' stock climbed in premarket trading after revealing plans to reduce 15% of its corporate staff, cutting approximately 1,750 positions in a historic move.
- The majority of layoffs are expected to be finalized by the end of Q2 2024.
- Despite recent gains, Southwest's shares have declined 10% over the past year through last Friday.
Shares of Southwest Airlines (LUV) rose notably in early trading on Tuesday following the company's announcement to implement its first significant workforce reduction in 53 years. The airline plans to eliminate around 1,750 corporate roles, representing 15% of its corporate employees.
The layoffs, primarily targeting senior leadership roles including 11 vice president-level positions and above, are scheduled to conclude by the end of the second quarter of 2024. This strategic restructuring aims to transform Southwest into a more agile and efficient organization. Early trading saw Southwest's shares increase by approximately 2%.
CEO Bob Jordan emphasized the gravity of this decision: “This is an unprecedented step in our 53-year history, reflecting a pivotal moment as we evolve Southwest Airlines into a leaner, faster, and more adaptive company.”
Activist Investor Elliott Spurs Strategic Overhaul
The workforce reduction is projected to generate $210 million in savings this year and $300 million in 2025, although the company will incur a one-time charge between $60 million and $80 million in Q1 2025.
Under pressure from activist investor Elliott Investment Management, Southwest has been actively reshaping its business model, including discontinuing its iconic open seating policy. Similar to competitors Delta Air Lines (DAL), United Airlines (UAL), and American Airlines (AAL), Southwest's profitability last year was largely driven by co-branded credit card partnerships rather than passenger revenue.
Earlier in 2024, Southwest appointed Tom Doxey, formerly of United Airlines and Breeze Airways, as its new Chief Financial Officer.
Despite recent positive movements, Southwest's stock has experienced a 10% decline over the past year through last Friday.
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