Southwest Airlines is cutting nearly a third of its flights to and from Atlanta, dealing a blow to the city and its employees based there.
It arrives just a few days after the carrier warned that it will have to make some “tough decisions” in the coming days under a plan to restore profits.
The flight cuts, announced in a memo Wednesday morning, come at a time when the future of its passenger-friendly policies is under threat.
The changes will reduce the number of workers needed in Atlanta, but there will be no job losses. Staff will have to move to another facility.
Flights to or from the city will be reduced from 567 per week to 361 starting in April, the airline said Wednesday. The cities it serves will be reduced from 37 to 21.
Airlines are desperately trying to cut costs while struggling Elliott Investment Management, a powerful hedge fund that has amassed a 10 percent stake in the airline, is calling for measures to cut costs and boost profits.
Southwest has already announced that it will be eliminating its popular open seating policy after half a century. Instead, it will soon charge passengers a fee to choose a seat.
In addition to a change of direction, Elliott is demanding that the iconic Southwest… The “bags fly free” benefit is eliminated – As the activist investor says, charging for luggage will generate tens of millions of dollars in revenue.
Southwest Airlines has warned it will have to make some “difficult decisions” in the coming days as part of a plan to regain profits
This change in schedule comes ahead of the investor day on Thursday.
Chief Executive Bob Jordan is expected to outline a plan to restore the airline to long-term profitability, a standard investors had expected from the airline before the pandemic.
The proposed changes include plans to switch to assigned seating and seats with extra legroom.
That move was first announced earlier this summer, but tomorrow Jordan will explain how Southwest will implement it.
It will involve higher-margin offerings that competitors like Delta and United Airlines adopted years ago.
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.
Southwest, which before the pandemic boasted a record 47 consecutive years of profits, is now struggling to regain sustained profitability. Interviews with analysts, investors and workers suggest the airline’s long-running success may have led to overconfidence and stubbornness among its leaders.
“They’ve been too entrenched and… too enamored of ‘we have to do it the Southwestern way,'” said Rob Britton, a professor at Georgetown University.
Responding to the criticism, a Southwest spokesman said the company typically doesn’t make a decision unless there is data to support it.
“Throughout its history, Southwest has been very deliberate in its decision-making when it comes to the markets it serves and its business model,” the spokesman said.
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.
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.
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.
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.