US Southwest Airlines Announces First Ever Mass Layoffs... Cuts 1,750 Employees
Elliott Becomes Major Shareholder as an Activist Fund
Cost Reduction as the Main Goal
Southwest Airlines in the United States is set to carry out a large-scale layoff for the first time since its founding, planning to dismiss about 1,750 employees.
According to the Wall Street Journal (WSJ) on the 17th (local time), Southwest Airlines, which had never conducted mass layoffs in its 53 years since its founding, will reduce 15% of its headquarters staff to cut costs.
In a statement released that day, Southwest Airlines said the layoffs would affect positions including senior executives and directors, with the reduction process starting at the end of April and expected to be completed by the end of the second quarter. The company anticipates that this restructuring will save $210 million this year and $300 million next year.
Bob Jordan, CEO of Southwest Airlines, said in a letter to employees, "(The layoffs are) a difficult and monumental change," noting that headquarters operating costs are rising rapidly.
He added, "We need to invest funds in the right places. Additionally, we must reduce redundant work and create an efficient organizational structure to increase clarity and speed."
There is analysis that this layoff measure is due to pressure from Elliott Investment Management (hereafter Elliott), a global activist hedge fund that shook Southwest Airlines last year.
Elliott, known for pressuring management strategies such as executive dismissals or business sales to increase shareholder returns, became a major shareholder by purchasing Southwest Airlines shares last year.
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Southwest Airlines had posted profits for 47 consecutive years through cost reduction and differentiated customer service but has faced difficulties since COVID-19. Accordingly, it halted pilot and flight attendant hiring last year and stopped hiring executives and headquarters staff last month. The chief financial officer and others recently announced their retirements as well.
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