Southwest Airlines
has introduced cost-cutting measures in 2025, with the company’s leadership aiming to improve shareholder returns in the near future.
Cost-cutting measures
CNBC, citing an internal memo that was seen by the outlet, reported that Southwest Airlines is suspending corporate hiring and promotions, summer internships, and employee get-togethers during the summer to reduce its operating costs and improve financial performance.
Bob Jordan, the President and chief executive officer (CEO) of Southwest Airlines, said that every single dollar mattered as the company continued to claw back to better financial performance.
Further changes could be coming when they make sense, Jordan added, according to the CNBC report. Simple Flying has approached Southwest Airlines for comment.
Photo: Philip Pilosian | Shutterstock
While the airline will publish its Q4 2024 and full-year results on January 30, its Q3 2024 results showed that year-on-year (YoY), the carrier’s passenger revenue yield per revenue passenger miles (RPM) was 17.01¢, while operating expenses per available seat mile (ASM) was 15.11¢.
In total, the airline’s quarterly revenue was $6.87 billion, with operating expenses coming just shy of that sum at $6.83 billion. Southwest Airlines ended the three-quarter period with a net income of $67 million.
During the first nine months of 2024, the company’s revenues and operating expenses were $20.553 billion and $20.51 billion, resulting in a net income of $204 million. During the same nine-month period in 2023, Southwest Airlines’ net income was $717 million.
As of Q3 2024, Southwest Airlines had 73,463 full-time equivalent employees (-1% YoY) and 811 aircraft (-0.7% YoY).
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Overstaffed
During the company’s investor day in September, Jordan admitted that Southwest Airlines’ recent financial performance was subpar, with the airline being affected by external and some controllable factors.
“I want to be clear that we own those challenges, and the plan we’re implementing is designed to ensure that we are positioned to navigate them and emerge even stronger.”
The chief executive reiterated something that the airline has been saying for months, namely that 
Boeing
“has delivered very few MAX aircraft” and has failed to certify the 737 MAX 7. As a result, all growth through 2026 will come from efficiency initiatives, including red-eye flights that will increase its fleet utilization.
“This, combined with essential-only hiring, will allow us to eliminate our current Boeing-driven overstaffing drag in 2025. With the exception of our pilots, we’re able to mitigate the vast majority of our current overstaffing through voluntary leave programs.”
Photo: Robin Guess | Shutterstock
At the time, Jordan added that the airline expected to end 2024 with 2,000 fewer employees and staffing numbers down in 2025 as well. Meanwhile, Tammy Romo, the executive vice president and chief financial officer (CFO), added that the company’s plan was to “begin normalizing our excess cash levels closer to pre-COVID levels while maintaining our strong balance sheet with ample liquidity.”
“Starting with our cost initiatives, optimizing our cost structure must be a top priority for us to preserve our low-cost leadership position and to achieve our long-term financial targets.”
Romo added that the company had an opportunity to rightsize with its modest and stable capacity plans over the next three years. The airline anticipated further headcount reductions in 2025, with attrition levels expected to exceed its controlled hiring.
This is partly driven by its use of digital enhancements and artificial intelligence (AI) to modernize contact centers and airports. Thus, its moderated capacity plan supports overall headcount flat to lower in 2027 compared to 2024.
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Tammy Romo, the CFO, and Linda Rutherford, the CAO, joined Southwest Airlines in the 1990s.
Growing revenues
At the same time, the airline has introduced several measures to increase its revenue-generating ability. Before and during the aforementioned investor day, Southwest Airlines said it would roll out red-eye flights and abandon its free-for-all seating model, opting to introduce assigned and premium seating onboard its Boeing 737 aircraft.
During the September 2024 event, Jordan detailed the airline would monetize its value proposition by offering products that passengers were willing to pay for, including assigned and premium seating.
Photo: Wenjie Zheng | Shutterstock
The plan, marketed as ‘Southwest. Even Better,’ was introduced amidst a proxy battle with Elliott Investment Management (Elliott), which began calling for the removal of the carrier’s current leadership in June.
Southwest Airlines and Elliott finalized an agreement that resulted in the latter accepting six new board members, five of whom were nominated by the activist investor, and Gary Kelly, the former chairman and CEO of Southwest Airlines, accelerated his retirement to November 2024 in October 2024.
Whether this was a long-lasting peace agreement or a fragile ceasefire remains to be seen. During the proxy battle that raged in the public eye, Elliott called for Jordan’s removal, accusing him and the company’s other executives of eroding industry-leading shareholder returns.
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