By Alison Sider and Chip Cutter

Victoria Slavic started her seven-year career at Southwest Airlines the way many hires do -- parading down a red carpet at its Dallas headquarters to cheers from pompom-waving co-workers.

The technology manager's job ended last month as she sat at home in front of her laptop. An executive delivered her termination notice on a scripted video call in listen-only mode. It lasted about seven minutes.

"It was gutting," said Slavic, who compares the elation she felt on her first day at Southwest to her wedding day and when her children were born.

For more than five decades, Southwest staffers -- who call themselves Cohearts -- didn't have to worry about losing their jobs in tough times. The company touted its ability to avoid mass layoffs during new-hire orientations. That practice changed in February, when the airline cut about 1,750 jobs, or 15% of its corporate workforce, to rein in fast-rising costs.

The layoffs are a watershed moment for an airline that credited its irreverent, we-are-family culture with much of its success. Having a "fun-luving" attitude -- a nod to Southwest's LUV stock symbol, its Dallas Love Field base and its early, love-themed marketing -- is a workplace mantra.

Top bosses long prided themselves on knowing the names of workers' children and often send handwritten notes to mark life events and birthdays. Every Halloween, executives don elaborate costumes and departments transform workspaces into haunted houses and other attractions for thousands of staffers and families. Many spend months practicing for an accompanying sketch show.

Southwest is making other changes once considered unthinkable. It is jettisoning hallmark policies such as open seating and its egalitarian cabins to chase higher revenue. The need to evolve has become urgent, as a business model that once upended the industry has fallen behind rivals.

Last year Southwest faced down Elliott Investment Management, which tried to oust the airline's top leaders and accused them of being insular and clinging to outdated strategies . A truce left Chief Executive Bob Jordan in charge but gave Elliott's chosen directors several board seats and significant sway.

Jordan is now under pressure to improve financial results. He outlined a plan to cut $500 million in costs by 2027. Hiring and promotions were put on ice. The festive rallies held for employees around the country have been scrubbed. The airline's board now wants deeper and faster cost-cutting, according to people familiar with the matter, and the airline has said it is working to accelerate and exceed its target.

Still, employees believed the airline's commitment to avoid layoffs was sacrosanct. That belief was instilled by the company's chain-smoking, Wild Turkey-drinking co-founder Herb Kelleher, who stepped down as chairman in 2008 and died in 2019.

"No matter how big you get, taking care of your employees -- being interested in your employees, communicating with your employees, honoring your employees -- is still Job One," Kelleher told business-school students at Stanford in 2006.

In past crises, Southwest employees pulled together, such as by chipping in to buy jet fuel when prices surged during the Gulf War, and donating part of their salaries to the company when revenue dried up after the 9/11 terrorist attacks.

"We cared about each other in a way I had not experienced in corporate America and haven't experienced since," said Liji Thomas, who joined Southwest in 2008 and helped start its diversity and inclusion program before departing in 2017.

First layoffs

On a Monday evening in February, Southwest closed its main headquarters building at 6 p.m. Employees were told to stay home Tuesday, when they would learn their fate in group video calls.

"It's like a death," said Evelyn Johnson, a 61-year-old customer-care operations coordinator in Colorado Springs, Colo., who spent some of the week crying after being laid off. She had applied to work at the airline after taking a Southwest flight to Los Angeles to scatter her father's ashes in the Pacific. The flight attendants treated her so kindly she was hooked, she said.

After she started in 2008, she made friends around the country. Her Instagram page became all about Southwest and her travels, supported by the company's flight benefits. Southwest's in-flight magazine -- before it was discontinued in 2020 -- featured her photo with a story in the January 2016 issue. "Our star," the caption read.

"We all drank that Kool-Aid," Johnson said. "You walked around the halls, everybody was happy."

Today, she sees the layoffs as a sign the company she still loves is different. "I know we need money to live in the world we live in, but you cannot lose your character in the process," she said.

For Terry Tallent, a facilitator for talent and leadership-development programs at the airline, Southwest was a "destination company." He threw himself into its traditions and its lingo after joining two years ago. When his condo caught fire and flooded, colleagues sent him a blanket and gift card. Nearly everything he bought was in the blue, red and yellow of the airline's heart-shaped logo.

"I was in love with the culture at Southwest," said Tallent, who was also laid off. "I'm sick over being gone."

Many who remain are rattled. For a few days, headquarters was a somber scene. Offices and cubicles were still decorated with memorabilia. When the company packed them up, some desks had enough swag to fill several boxes.

A 'crusade mentality'

Southwest's CEO told staffers that the airline needed to return to its more agile origins as he announced the layoffs.

"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," Jordan wrote to employees.

Southwest thrived for decades on its scrappy startup roots. Pilots helped sling bags, and flight attendants raced against a clock to tidy cabins to keep planes moving. In an oft-repeated story, a flight attendant in 1994 helped save Southwest $300,000 annually by suggesting the airline switch to plain trash bags for cabin cleanup, rather than bags with the company logo.

The airline prided itself on needing only two employees where other carriers might hire three to enable low fares, said Dave Ridley, who spent 27 years at Southwest, including as chief marketing officer.

"There was a crusade mentality: It was us against the world," said Ridley, who left in 2015 but remains in touch with employees. "It created a profitability machine."

The trappings endured -- the spirit parties, Halloween costumes, the in-flight dad jokes. Yet over the years, Southwest grew into a behemoth that often forced employees to operate in a thicket of bureaucracy, with several layers of management and little accountability when projects dragged on, employees and industry executives say. One joke among staffers is that there is now a vice president of pretzels.

"They put a high value on culture and their way of doing things," said Kevin Healy, a former executive at AirTran when Southwest acquired it in 2011. "For years, it didn't seem to matter -- everybody had to figure out how to compete with Southwest. Then they got to the point where they had to compete with everybody else."

Corporate head count has increased 28% since 2019, outpacing the company's 19% growth in total employment. That discrepancy rankled labor groups. After a 2022 operational meltdown, when the airline canceled nearly 17,000 flights over the holiday season, pilot-union official Tom Nekouei wrote that Southwest had become a "headquarters-centric cult" with "an explosion of stove-piped vice presidential fiefdoms." Meanwhile, nonunion employees grumbled about the cost of the airline's expensive new contracts with unions.

Some Southwest veterans say they are optimistic the cuts won't permanently damage Southwest's identity. Theresa Braeuer, who worked there for more than a decade before her layoff, said the outpouring of support from colleagues afterward shows the resilience of what made it a special place to work .

"The people of Southwest have to be the culture," she said. "The company can't make the culture."

Write to Alison Sider at alison.sider@wsj.com and Chip Cutter at chip.cutter@wsj.com

(END) Dow Jones Newswires

March 03, 2025 05:30 ET (10:30 GMT)

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