Southwest Airlines Co. (LUV) announced plans to lay off a certain portion of its workforce. The move is part of the company’s transformational plan to simplify its organizational structure, stay competitive, reduce operating costs and increase efficiency.

Details of LUV’s Downsizing & Its Expected Benefits

LUV’s lay off plans are targeted on corporate overhead and leadership positions. LUV aims to cut 15% of its corporate positions (which includes senior leadership and directors) by the end of the second quarter of 2025, which reflects approximately 1,750 employee roles. Eleven senior leadership positions (which include vice president and above) also account for the 15% of the LUV’s senior management committee and will be eliminated as part of this restructuring.

Southwest Airlines expects the layoffs to result in cost savings. The company estimates to save about $210 million this year and roughly $300 million in 2026.

These savings exclude an expected one-time charge of $60-$80 million in the first quarter of 2025 (related to severance payments and post-employment benefits, which are likely to be considered as a special item). One-time costs vary based on specific employee elections during the workforce reduction.

Bob Jordan, president, chief executive officer & vice chairman of LUV’s board of directors, stated, “This decision is unprecedented in our 53-year history, and change requires that we make difficult decisions. We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization.” He further added, “I arrived at this decision thoughtfully and carefully, knowing how hard it will be to say goodbye to colleagues who have been a significant part of our Southwest Culture and accomplishments. I’m grateful to all Southwest Employees who have shared in our legendary history and to those that will guide us into the next era of Southwest Airlines.”

To Conclude

LUV has always been actively involved in its cost-saving initiatives. The company aims to minimize hiring, optimize scheduling, improve corporate efficiency and capitalize on supply-chain opportunities. These actions, in combination, are expected to exceed the $500 million cost initiative announced at LUV’s 2024 Investor Day.

We would like to remind investors that, to reduce costs and boost profit margins, Southwest Airlines has hit the pause button for corporate hiring. This Dallas-based airline company has also decided to suspend promotions and its summer internship program, as well as eliminate some employee team-building events for the same purpose.

Last month, LUV also inked a deal with Babcock & Brown Aircraft Management to sell and lease back 36 Boeing 737-800 aircraft in its fleet to raise cash. The transaction should help the Dallas-based carrier raise cash, ease the pressure on its balance sheet and strengthen its financial position.

Given this encouraging backdrop, shares of this Zacks Rank #3 (Hold) company have gained 13.3% over the past six months compared with 29.8% growth of the Zacks Airline industry.

Six-Month Price Comparison

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Other Airline Picks

Investors interested in the Zacks Airline industry may also consider United Airlines UAL and SkyWest SKYW. Each stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Airlines has an expected earnings growth rate of 21.11% for the current year. The Zacks Consensus Estimate for UAL’s 2025 earnings per share has been revised 10.6% upward in the past 60 days.

The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 22.93%. Shares of UAL have surged 161.2% in the past year.

SkyWest, founded in 1972, is based in St. George and operates regional jets for major U.S. airlines. SKYW’S track record of successfully meeting the requirements of each of its airline heavyweight partners bodes well for the company. Revenues from flying agreements (which account for the bulk of the top line) are impressive owing to SKYW’s above ability. Owing to an uptick in air travel demand, passenger volumes have been upbeat and are likely to increase going forward as well. This is likely to keep SKYW's top line in good shape.

SKYW has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 16.71%. The Zacks Consensus Estimate for 2025 earnings per share has been revised 7.9% upward in the past 60 days.

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