A Southwest Airlines Boeing 737-7H4 approaches San Diego International Airport for landing in San Diego, California, from Houston on June 28, 2024.
Kevin Carter |
Southwest Airlines has warned employees that they will have to make “difficult decisions” in the future to increase profits as the airline comes under pressure from activist investor Elliott Investment Management, which has sought a change in leadership at the company.
Southwest announced a series of major changes to its 50-year-old business model this summer in an effort to boost revenue. These include replacing free seat selection with fixed seats, offering seats with more legroom and higher prices, and introducing night flights.
In addition, the company now also allows the listing of its flights on Google Flights and kayak and has changed its ads to appeal to more younger consumers, COO Andrew Watterson said in a video message to employees last week.
“But all of this is not enough. We also need to change our network,” Watterson said in the video, a transcript of which is said to be available to CNBC.
“We’re facing some difficult decisions. It’s not about closing stations. But we need to continue to move the network forward to become profitable again,” Watterson said. “And so I apologize in advance if this affects you as a private citizen.”
Southwest plans to release an updated schedule on Wednesday for flights on sale through June 4. The airline said Watterson’s video was part of a routine video series about the company’s initiatives.
Southwest is not planning to impose short-time work, but could reduce its presence in certain cities and transfer employees to other locations, a person familiar with the matter said. The airline wants to cut costs and focus on profitable flying, the company said.
Other carriers such as JetBlue have canceled routes this year in order to use aircraft on flights that generate higher revenue.
Southwest will provide further details on its initiatives and route changes this Thursday during an investor day at its Dallas headquarters.
Elliott pushed for a leadership change at the airline and criticized Southwest management for not doing enough to improve the company’s bottom line. Earlier this month, Chairman and former CEO Gary Kelly said he would step down after the airline’s shareholder meeting next year.
The news was previously reported in the industry blog “View from the Wing”.
