Southwest Airlines has indicated to its employees that it will need to make challenging decisions to enhance profitability amid pressure from activist investor Elliott Investment Management, which has been advocating for changes in the company’s leadership.
During the summer, Southwest Airlines announced significant modifications to its longstanding business model in an effort to increase revenue. These changes include shifting from open seating to assigned seats, introducing seats with more legroom that command higher fares, and initiating red-eye flights.
Additionally, the airline has started listing its flights on platforms such as Google Flights and Kayak, and has adjusted its advertising to appeal to younger consumers, according to a video message from COO Andrew Watterson to the staff last week.
In the video, Watterson emphasized that these measures alone were insufficient and that further network changes were necessary to steer the company back to profitability. He noted that while station closures were not planned, there would be difficult decisions impacting individuals, for which he expressed preemptive apologies.
Southwest Airlines is scheduled to release an updated flight schedule on Wednesday, extending through June 4. The company described Watterson’s video as part of a routine series about the carrier’s ongoing initiatives.
While Southwest does not plan to introduce furloughs, it may reduce its presence in certain cities, potentially leading to staff transfers to other locations. The airline aims to cut costs and prioritize profitable routes.
Other airlines, such as JetBlue, have also curtailed routes this year to allocate aircraft to more lucrative flights.
Southwest is expected to provide further details on its strategic initiatives and route adjustments during an investor day event on Thursday at its headquarters in Dallas.
Elliott Investment Management has been pushing for a leadership change and has criticized Southwest’s management for insufficient efforts in improving the company’s financial performance. Earlier this month, executive chairman and former CEO Gary Kelly announced plans to step down following the carrier’s shareholder meeting next year.
The information was initially reported by the industry blog View from the Wing.
