Southwest Airlines in 2025 will end its decades-old open-seating policy and debut premium seating with extra legroom, the company announced Thursday as part of a series of notices of service and structure changes released along with its second-quarter earnings report.
The carrier also introduced redeye flying, a change which with initial overnight routes available for sale now, which will begin in February 2025.
Southwest in April teased the possibility of changes to its cabin and other processes, and delivered Thursday with the news of assigned seating and extra-legroom seats. CEO Bob Jordan said the carrier wasn't done with changes, promising more details of "an ongoing strategic transformation of the business" at its investor day on Sept. 26.
The moves come after another quarter that carrier executives said wasn't up to snuff. "Our overall results … are not where we need them to be, and they are not reflective of what we are capable of delivering," Jordan said.
The situation is particularly acute for the carrier and Jordan, with activist investor Elliott Investment Management increasing its stake in the carrier, calling for the CEO's ouster, and threatening a proxy battle over concerns about Southwest's performance.
(Jordan on Thursday said Elliott has not "shown any willingness to engage in any meaningful conversations with us." Elliott countered with a statement that it had "engaged in direct dialogue with Southwest's board," called Thursday's announcements "obvious attempts at self-preservation," and said the initiatives should have been implemented more than a decade earlier.)
Jordan said Southwest expects about one-third of available seats to offer extra legroom after the fleet is reconfigured, a process which he said will begin only after receiving certification of the plans from the U.S. Federal Aviation Administration, which he said he expected to take "several months." As such, the new configurations will not debut until 2025.
Southwest's move to assigned seating next year follows a survey Jordan said the airline conducted that showed 80 percent of the airline's customers prefer an assigned seat, and 86 percent of travelers that fly other carriers do too, and when customers defect from the carrier, the open-seating policy has been the top reason why. "I was surprised at the level of the preference," he said.
Jordan also noted the new seating policy could attract corporate travelers. "We've talked a lot about our desire and initiatives to grow market share with corporate business travelers in the managed business space, and their preference is for an assigned versus an open seat," he said.
Unspecified on Thursday was whether and how the carrier planned to charge for the new options. Jordan noted that Southwest's current ancillary-fee products, including its Early Bird priority-boarding service, generate "just shy of $1 billion for us," while "the opportunity and the assigned seating and extra-legroom world is substantially north of that."
One Southwest service that Jordan said was safe was Bags Fly Free, the service in which, unlike its large U.S. competitors, allows two checked bags without fees. "It's not something under consideration right now as we rethink our products related to the seating and the cabin," he said, noting that the policy is "the No. 1 issue in terms of why customers choose Southwest."
Executive Moves
Southwest shuffled some of its senior managers as part of the planned moves. Chief commercial officer Ryan Green will head up the efforts as EVP of commercial transformation, reporting to Jordan. Green departs day-to-day leadership of the commercial organization.
Southwest also created a new role of SVP and chief revenue officer, who when filled will report to COO Andrew Watterson and "focus on Southwest's core business and day-to-day revenue production." The head of Southwest Business, currently vacant after the departure of Dave Harvey in May, also will report to the new SVP and chief revenue officer, as will VP of revenue management Matt Louis and, when filled, VP of pricing, "a new role created to focus on the complex world of airline pricing."
Southwest Q2 Metrics
Southwest reported second-quarter passenger revenue of more than $6.7 billion, up 4.7 percent year over year. Total revenue was nearly $7.4 billion, up 4.5 percent from Q2 2023. Southwest's net income was $367 million, down from $683 million a year prior.
Second-quarter average fuel costs were $2.76 per gallon.
Southwest projects third-quarter capacity to increase about 2 percent year over year, with full-year capacity forecast to rise 4 percent. The carrier projects third-quarter per-gallon fuel cost of $2.60 to $2.70, with full-year cost of $2.70 to $2.80.
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