Southwest Airlines is taking steps to reduce costs by pausing hiring and scaling back events, facing pressure from hedge fund Elliott, which advocates for changes to improve the company's financial performance. This move comes after a period of challenges for the airline, including the impact of the pandemic on air travel and competition from ultra-low-cost carriers.
Southwest Airlines is taking steps to cut costs by pausing some hiring practices and scaling back events. The company announced on Tuesday that it would be limiting discretionary spending, including the cancellation of its Southwest Rallies for the year. Additionally, Southwest is putting a hold on most summer internship positions (while honoring existing offers) and suspending all non-contract internal and external hiring.
Southwest stated that it will continue to assess its hiring needs and decide when it's appropriate to resume hiring. This move comes as Southwest faces pressure from the hedge fund Elliott, which has acquired a minority stake in the company and is pushing for changes to improve financial performance and stock price. Southwest previously agreed to revamp its board, with Chairman Gary Kelly and six board members stepping down in November and being replaced by Elliott-backed candidates. Southwest Airlines has historically been known for its profitability, boasting a streak of 50 years without a full-year loss until the pandemic significantly impacted air travel in 2020. While the company has remained more profitable than American Airlines since then, it lags behind Delta Air Lines and United Airlines in terms of profitability. Southwest's original success was built on operating in less crowded secondary airports, allowing for quick turnaround times and appealing to budget-conscious travelers with low fares and flexible baggage policies. However, Southwest now serves many of the same major airports as its competitors, facing pressure from the rise of ultra-low-cost carriers and needing to adjust its strategies. To stay competitive, Southwest is exploring new initiatives including charging for seat selection, partnering with international airlines like Icelandair to expand its reach beyond North America and Central America, and managing staffing levels at airports through temporary leaves of absence to address concerns about overstaffing
Southwest Airlines Hedge Fund Elliott Hiring Freeze Cost Reduction Airline Industry Profitability Competition
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