Southwest Airlines has warned it will have to make some “difficult decisions” in the coming days as part of a plan to restore profits.
The announcement, sent to employees on Thursday, comes at a time when the future of the airline’s “bags fly free” benefit remains uncertain, after not allowing customers to pay for luggage for more than 50 years.
The benefit was previously bolstered by other passenger-friendly policies such as open seating, which were recently lost as the airline tried to fend off changes demanded by activist Elliott Investment Management.
Apparently not enough, Chief Operating Officer Andrew Watterson reportedly told employees in a video that the worst is yet to come.
Scroll down to watch the video:
Southwest Airlines has warned it will have to make some “difficult decisions” in the coming days as part of a plan to regain profits
The announcement, sent to employees on Thursday, comes at a time when the future of the airline’s “bags fly free” benefit remains uncertain, after allowing customers to skip baggage charges for more than 50 years.
“There are also some tough decisions ahead,” Watterson said. Bloomberg reported on saturday
“It’s not about city closures,” the management team member continued.
‘But you know, there will be bigger changes for some cities.
“I apologize in advance if you as an individual are affected by this,” he added, without offering details other than saying that Southwest will release a revised flight schedule on Wednesday that should include the changes.
In a statement explaining the video, Southwest said it was part of a regular series of explanatory presentations the chief operating officer sends to his staff.
Meanwhile, the day after the new schedule is sent out, the airline will have to detail the changes already made to increase profits, as well as changes to its route and flight network.
This includes the introduction of assigned seating, after more than half a century of free-form seating that had distinguished Southwest from the rest.
The new steps will be announced during an investor day in Dallas as investors such as Elliott fight to oust CEO Bob Jordan and install a new board with their own nominees.
The airline has already scrapped passenger-friendly policies such as open seating in a bid to avoid changes demanded by activist Elliott Investment Management.
The new steps will be announced during an investor day in Dallas as investors including Elliott seek to oust Chief Executive Bob Jordan and install a new board with its own nominees.
Chief Operating Officer Andrew Watterson, shown here testifying before the U.S. Senate at a 2023 hearing designed to strengthen airline operations, was the one who told employees the message.
“We’re trying to get more out of what we already have, but controlling our costs won’t be enough,” Watterson reportedly told employees Thursday.
‘Because we are not going to do this at the expense of employees or customers.
“It has to be on the revenue side where we make the effort to balance our profitability and equation.”
Elliott, one of the airline’s largest investors, said the company’s business model had failed to address changing consumer demands for more premium products.
Bonuses such as the “baggage flies free” benefit and open seating, which are indelibly linked to the airline’s image, appear to be part of the company’s concerns, as the airline has also changed its advertising to reach younger consumers.
This comes in response to seats that have become vacant since the pandemic, in part by business people who are not travelling as much as they used to.
Elliott has said Jordan and soon-to-be-former Southwest President Gary Kelly have refused to adapt the airline’s business model, hence the recent changes after Kelly resigned Sept. 10.
Elliott has said that Jordan and soon-to-be-former Southwest president Gary Kelly (seen here) have refused to adapt the airline’s business model, hence the recent changes after Kelly resigned on Sept. 10.
In a statement, Southwest said Kelly will step down from his position at the airline’s annual meeting next spring.
The airline added that six of its remaining 14 directors will resign after the November board meeting, but did not specify who.
The company will appoint four new independent directors to take their place, with the fate of board member Jordan also uncertain.
A report released earlier this year showed how airlines including Delta, United and American pocketed a staggering $33.3 billion in baggage fees alone last year, a sharp 15 percent increase from $29 billion in 2022.
This sum is made up solely of fees for larger carry-on bags, fees for standard checked bags and fines for overweight or oversized checked bags and accounted for 4.1 percent of global airline revenues last year.