Southwest Airlines announced on Tuesday that it will temporarily halt the filling of certain positions and summer internships as part of its strategy to reduce costs. The airline affirmed its commitment to honor internship offers that have already been accepted but indicated a pause on all internal and external hiring that isn’t under contract. The company plans to regularly assess its staffing requirements to determine the appropriate time to resume hiring.
In its efforts to minimize discretionary expenses, Southwest also revealed that it will not hold its traditional annual rallies where employees typically gather to celebrate achievements and hear updates from executives regarding future plans.
In September, Southwest disclosed plans to restructure its board of directors, with the chairman set to retire in 2025, responding partially to pressure from hedge fund Elliott Investment Management, which has advocated for significant changes within the airline.
Elliott, led by billionaire Paul Singer, has acquired a minority stake in Southwest and has lobbied for initiatives aimed at enhancing the airline’s financial health and boosting its stock value. The two parties came to a resolution in October, during which Southwest stated that Chairman Gary Kelly and six board members would transition out of their roles on November 1, to be succeeded by five candidates backed by Elliott and an ex-executive from Chevron.
For the first 50 years of its operation, Southwest was known for its profitability and did not experience a full-year loss until the pandemic severely impacted air travel in 2020. Although it has performed better financially than American Airlines post-pandemic, it still lags behind Delta Air Lines and United Airlines in profitability.
Historically, Southwest was considered a scrappy underdog, operating primarily from less-busy secondary airports, allowing for quick turnaround times and the ability to quickly board new passengers. It attracted budget-minded travelers by offering low fare prices and no fees for changing reservations or checking in up to two bags.
However, Southwest has expanded its routes to include many major airports that are also served by its competitors. Additionally, it faces price competition from the increasing number of “ultra-low-cost carriers.”
As part of its strategy to revitalize its business, Southwest plans to enhance revenue by converting around one-third of its aircraft seats to premium seating options that provide extra legroom. Furthermore, it will implement a seat assignment policy, moving away from its longstanding practice of allowing passengers to select their seats after boarding. The airline is also seeking partnerships with international carriers, beginning with Icelandair, to expand its destinations beyond North and Central America.
In November, Southwest proactively offered buyouts and extended leave options to airport personnel to address what it described as “overstaffing in certain locations,” a result of slowed deliveries of new aircraft from Boeing.
Following these announcements, shares of Southwest saw a slight increase during morning trading.
