Topline
Southwest Airlines said Thursday it will cut 2,000 jobs and cease operations at four airports, partly to address “significant challenges” caused by delays in Boeing aircraft deliveries, as the world’s largest operator of 737 Max airplanes seeks to stem steep first-quarter losses.
Key Facts
Southwest Airlines expects fewer deliveries of 737 Max jets from Boeing this year, as the aircraft manufacturer had reportedly delayed plans to increase production after a door plug blew out of a 737 Max 9 earlier this year.
The Dallas-based budget airline reported a first-quarter loss of $231 million Thursday, steeper than a $159 million loss in the same period last year, despite an 11% increase in operating revenue to $6.3 billion.
Southwest Airlines attributed the lackluster performance to rising costs and assured it would continue to control expenses.
The airline expects to end 2024 with around 2,000 fewer workers compared to last year, and plans to slow hiring and offer voluntary time off programs, the company said in a statement accompanying the first-quarter earnings (it’s unclear whether the company is planning layoffs as part of the job cuts, which represent nearly 3% of the current 74,000 employees).
The airline also said it would stop flying to Bellingham International Airport in Washington, Cozumel International Airport in Mexico, Houston’s George Bush Intercontinental Airport in Texas and Syracuse Hancock International Airport in New York.
Big Number
57%. That’s the dropoff in Max 8 aircraft deliveries Southwest Airlines expects in 2024, down from 46 Boeing jets previously in plan some weeks ago to just 20. Southwest plans to offset the shortfall by retiring only 35 aircraft this year to support its fleet against the previous expectation of 49 aircraft. The reduction will put the number of aircraft in Southwest fleet at roughly 802 by the end of this year—all of which are variants of the Boeing 737.
Surprising Fact
Southwest shares were down 9% to $26.70 on Thursday following the first-quarter loss, cost-cutting measures and decisions to cease service at four airports.
Key Background
Boeing’s plans to reduce aircraft production is dealing a blow to airlines and their customers. The aircraft manufacturer resolved to cut production after a door blew plug off of an Alaska Airline 737 Max 9 jet in January, causing the grounding of many 737 Max 9 aircraft operated by U.S. airlines or in U.S. territory. Boeing reportedly plans to pay out $443 million in compensation to airline customers following the incident. The air mishap is the latest problem for the plane maker after its 737 Max 8 jets operated by Indonesia’s Lion Air crashed into the Java Sea in 2018 and another by Ethiopian Airlines crashed a few minutes after takeoff in Addis Ababa in 2019, raising questions about air safety.
