Last week Southwest Airlines CEO Bob Jordan said he isn’t resigning, which – outside of an expression of ‘full confidence’ from the Board – is the surest sign his two-year tenure is jeopardy.
Southwest Airlines has struggled with losses and is considering changes to its business like extra legroom seating and (some) assigned seats.
However activist investor Elliott Capital Management has taken a nearly $2 billion stake in the airline and put out a plan for change.
- Change at the executive level. Southwest Airlines management has been slow to adapt to consumer preferences, as Jordan himself acknowledged themselves in their first quarter earnings call .
- Become more like legacy airlines following a model that has failed for JetBlue over the past decade, giving up its competitive differentiation and turning into a money-loser with plummeting stock price.
Credit: Southwest Airlines
Elliott highlights a plan for checked bag fees and basic economy, seemingly oblivious that the market continues to value Southwest as a substantial premium over competitors following their proscribed model – like American Airlines and even Delta.
Nonetheless, Enilria reported yesterday on a rumor that CEO Bob Jordan’s departure is imminent with current Chief Operating Officer Andrew Watterson his replacement. He is not a fan of the idea,
Southwest COO (Watterson) was the VP of Network Planning at Hawaiian until 2013? Almost 100% means Watterson is behind Southwest’s bloodbath of red ink flying intra-island. So, while Watterson is an outsider (good), it also means he is a big drinker of the Southwest “never admit your own decision was a bad one”-brand Kool-Aid (BAD).
Beat of Hawaii is reporting on the rumor of Jordan’s departure and Watterson’s elevation as well.
As rumors swirl rapidly in the airline industry, Southwest Airlines may be gearing up for significant announcements, as early as Friday, that could greatly impact Hawaii flights. Two important developments appear on the horizon at Southwest: the long-anticipated introduction of redeye Hawaii flights (and others) and the potential change in leadership that’s been looming recently.
Since they’re also reporting on Southwest’s impending introduction of redeye flights, along similar lines to Enilria, it’s possible that these two outlets aren’t relying on independent sources. However the rumors about Bob Jordan’s future are certainly spreading, as a result of the airline’s new major investor seeking changes at the top and Bob Jordan speaking directly to the chances of his own removal.
It would be odd, though, for Bob Jordan to departure while the airline retains former CEO and current board chairman Gary Kelly.
This is sad. I used to fly different carriers, but then they upped the prices and number of fees for just about anything. Switched to Southwest 10 years ago and been exclusive since. Made since especially since I flew mostly with family in that timeframe. The Early Bird check-in was fine occasionally and was reasonably priced. Now Early Bird pricing is going up. Not saying I’m going to start flying Spirit or AA, but my patronage is Southwest’s to lose.
I don’t get the “cattle car” references since in the end everyone is seated. Nothing like a subway or bus experience. The process may be a little strange to someone that is apprehensive at not knowing exactly where they are sitting.
I have only flown Southwest for over 30 years. If these morons turn Southwest into another “legacy” airline – I will never fly with Southwest again. I am sure I speak for many others.
Becoming just another legacy airline will be the downfall of SWA, not just with passengers, but also employees who appreciate being different than the big 3.
I mostly fly Southwest. I think the boarding process is actually easier and more civilized than the legacy carriers. On Southwest, everyone lines up in numerical order. There is no need to line up early, there is no crowding or pushing at the gate. By contrast, on United recently at Dulles, it was utter mayhem getting on the plane. People lined up a half hour before boarding even began. It was unclear which line was which boarding group. I much prefer the orderly SWA approach even if you don’t have an assigned seat. As long as you board before the end of the Bs, you almost certainly will get an aisle or window if that’s what you want.
Have to wonder if they have become too big for their business model (their so called “SWA effect” failed miserably in Hawaii) but as you say, no way can they beat the big three at their game……as to the people @ Rick is alluding to, there is a finite amount of that customer base, as well as employees willing to drink the SWA kool aid….
As the comments here illustrate, there is a huge divide between SWA loyalists who like what makes SWA unique, and others who refuse to even consider flying SWA. I’m in the latter group, as I hate the open boarding policy, the stress that uncertainty of where you will seat brings (it’s simple human psychology that uncertainty creates stress), and the petty gaming and abuse that is out of control, just to get onboard sooner. They need to strike a balance to not turn off the loyalists, but still address the issues that keep people like me from flying SWA.
I don’t think they need to turn into a legacy airline, with first, economy plus, etc, but they need to either figure out a way to stop the shenanigans. Personally I’d go with assigned seating for most groups, and then a new basic economy product that boards last with open seating.
If Southwest becomes just like all the other airlines, why would you fly them?
Their current CEO, and Elliot Management Group, are more concerned about shareholder profits than they are about their customers!
So go ahead and change to become like all the rest; watch your ridership plummet!
Elliot’s proposals make sense for them as they never intend to make a company better, so that it grows and succeeds. They are a business parasite and are only out to line their own pockets as much as they can in 3-5 years. Then they will cash out and leave Southwest to die via bankruptcy
Elliot has no interest in making Southwest a vibrant and surviving entity, that would take investment, time and keeping employees; none of which align with their need to recoup their cash as soon as possible
let’s define what makes them unique from the perspective of the fans,
then we can argue about the effect of “changes”
program:
————–
“points that never expire” (but carrier-branded credit cards really eliminate this for everyone)
point-per-cent conversion tied directly to airfare that is top 10% in “value”
companion pass
very high (in comparison) award availability
product:
————-
one class of travel
one extra inch of pitch
“you get to choose your seat”
“bags fly free”
business:
————–
30 years of growth, profits and 7(?) reverse splits….
…..that created an investor appetite for “magic” profits….
…..achieved by log scaling of a single streamlined cost model…
…. that has always used manual processes and systems from the 90s…
…. which diverted zero earnings to infrastructure investment…
…. and now that the workforce is senior, highly compensated….
…. and airfares match or exceed legacies in all markets….
…. and after the $59 sale inventory is gone…
Gordon Gekko is here to drive the biggest short play in airline history…
…..because there is no way to exponentially grow revenue & earnings….
…..necessary to feed the investor overlords.
my opinions on:
product: i can put my bag over my head and used to be i could pay ebci and get aisle if not the exit row or the secret first class, and the extra 1″ is survival space; flying in back on any other airline it is impossible to buy domestic+ and put my bag over my head because of the boarding group catastrophe at each carrier, but the bridge and tunnel hordes, the ghetto, kettles and aggy infest southwest like the plague, and the ada exploiters have caused the entire “any seat” CATTLE CALL to reach 3rd-world status; summary: the product is a joke, FAs are worthless and who gives a fork if they are funny; at least they used to be hot, but that’s gone too.
program: there are those for whom it is great value, especially marriages in a position to travel and families with multiple children; there are those like me who see the points as worthless and struggle to use them now that they have eliminated my 8 prior favorite gift cards, specifically amazon, petsmart and omaha steaks; i will never choose to fly on southwest if i am paying for my own trip. no hotel partner transfers, no plus, no business, and no first = no interest.
overall, i would be shorting if i had walkaway money.
@TXP…
That’s what I’ve been saying for a while now. The legacy carriers ARE the ones that are more like like a cattle car.
When AA starts boarding, just look at everyone in Groups 6 – 9 rush the gate and huddle around it…even though they’re only at Group 3. It’s a real pain where you have push through…just to board.
At least with Southwest’s system, Group C people aren’t rushing the gate while Group A is still boarding.
What I find crazy is how people say SW doesn’t change, when, they do.
1) They used to only serve secondary airports.
2) They used to only grow organically…then they bought AirTran
3) They used to be only domestic.
4) Added Wifi for a reasonable price
5) Added Hawaii service
Here are some things I think might be intersting:
1) More international flying. When you’re the largest domestic carrier, you will have no problem filling seats for those international flights.
2) Become even more of a connecting carrier
3) Because of points 1 & 2, get a second aircraft type for those long international flights. 787?
4) Because of points 1, 2 & 3, how about a 3rd aircraft type and do some regional flying
5) Because of points 1, 2, 3 & 4 be open to creating an alliance and/or codeshare partner
6) Invest in airport clubs…either home grown, or partner with someone like Priority Pass
7) If bag fees are a must, 1st bag free, charge for the 2nd bag
I’m not a die-hard SWA fan but I do “luv” the ability to check a bag, even 2, for free if that’s what I want/need to do, and I REALLY love the flexibility of being able to cancel up to 10 minutes prior to departure and getting a credit I can use for any SWA destination and far into the future cause the credits no longer expire!
I think the SWA boarding process is very orderly–you know exactly where to stand and exactly which group is boarding, and at least out of Denver people are very polite. As for no assigned seat, either I pay for early bird or have my phone in hand, ready to check in for good boarding position. Since I’m usually flying solo, I’ve never had a problem finding a decent seat.
I agree with other comment made that legacy airline boarding has become chaotic. I recently took a UAL flight that was crazy in the boarding area! Sure I had an assigned seat but my carry-on didn’t, and since I have no loyalty status I was in group 5, and there were no monitors showing boarding progress. PLUS the gate agent wanted to charge me extra for a small purse I had over my shoulder–I had to shove it in my tote bag for her to see it would all fit under the seat.
Really I long for the days, many years ago, when air travel was something to look forward to, or at least not to dread.
Oh how I LUV flying Southwest. They Fly places I want to go out of airports that I like to fly from!! I like others always check Southwest first when deciding to fly somewhere so I can see if I can get closer to my destination without crowded crazy airports. The only thing I have noticed very recently is whatever flights I pick they are changing to an inconvenient time for me and not necessarily notifying me. For some reason I dont get their emails. Fortunately my husband does and forwards them to me.
@ David R. Miller — For everyone else’s sake, let’s hope you get your way. Have you ever considered maybe not being so angry?
Bag fees would be a massive both for product differentiation, and because a lot of travelers are frustrated with how long it takes to fill and empty an airplane when everyone is trying to fit a vacation’s worth of luggage in overhead bins.
And if SWA’s vulture capitalists want to try basic economy, they really don’t understand the airline the own a chunk of (but that’s not surprising. Too many VCs are not about optimizing a business, but stripping value to pay out to themselves as biggie shareholders).
I’m sad to think SWA could spiral out that way.
For the people who would never fly WN again if some changes are implemented, genuine question but who would you fly instead?
I see so many people block seats during boarding or pulling some kind of scam to board early. It might be orderly but why let the people “gaming” the system get the open seat? No games or tricks or stress when boarding a carrier with assigned seats.
As a FA for SWA I support assigned seating. I’m tired of being put in the middle when it comes to seat savings & Jetway Jesuses.
Why would anyone fly SWA? They aren’t even cheaper anymore.
Stick to the network carriers, and get access to global alliance programs, seat assignments, business class, meals, flights around the world, and so much more.
I hope SWA doesn’t start charging for your bags. I fly with SW for the 2 free bags, the points the check in early bird. The new low cost Wednesday’s that they do. However I don’t like that they say they will be doing direct flights to San Diego and NOT do it. I’m flying there in October and they talked about that last year still haven’t done it. I love the cancellation fee it DOESN’T expire and I can use it any time and any where. I feel that before they make any changes they should do a sudjustion box and get customers opinions. On what they should keep or do away with. I feel if they start charging for bag’s they will lose a lot customers. I luv SW now. And the old saying goes ” DON’T fix it if it’s NOT broke!!!
I have always enjoyed flying Southwest. They were a breath of fresh air. They just don’t serve many of the places I want to go. When I recently went on my Southwest account I noticed they had taken away my gender designation “Female. “It was just a blank line. I tried to put female back in but the site would not permit me to get rid of the line the way they got rid of my gender. Stay out of politics and fly the planes.
Letting ANYONE from Hawaiian Airlines (or any legacy kool-aid drinker) would be a catastrophe. All Southwest needs to do is fix the backend (technology and operations). This will allow them to adjust their revenue management strategies efficiently and more effectively. Growth always requires adjustments internally while providing the same service your core customer base values and RETURNS to.
I have been flying SWA since forever. I only fly the other disappointing airlines when SWA doesn’t go where I’m trying to go. I hear alot of people talking about the games people play to board the plane early. I myself am a heart patient I can’t walk a very far distance so I always request a wheelchair. Now, if my gate is close by I walk bit I do early check in where I still get a pretty good seat. Charging for luggage is ridiculous especially when I have just forked over hundreds of dollars for a ticket, like SWA your luggage should go with you. I have flown spirit and they are truly a rip off and very chaotic. I really don’t care where I sit on the plane, because the whole plane get there at the same time. SWA, please do not change into those money hungry airlines that nickel and dime you for everything.
Changing the good things about SW or making it a legacy airline, will be the beginning of the end. Let this investor group do what they do best. Invest. They don’t run an airline. If we let them think they can, it will be curtains for SW. I think all of us customers are on the same page here. SW does need to make some changes. But nothing that was suggested by Elliott Capitol. They need to stay out of it.
If the outside investor wants to change things for Southwest to be like every other carrier, I think many people would switch or leave flying Southwest in protest. Since its beginning, Southwest has been a breath of fresh air in the airline industry, all while other carriers continue the slow decline of service and charging more for what they don’t deliver. The many bankruptcies of all other major carriers and not Southwest is time tested they have the right product mix and pricing, and the right leadership.
If the outside investors change Southwest, I’ll cash in my points and send them my frequent fly card which I have had for 30+ years, back to the day of “The Company Club”.
Don’t try to reinvent the wheel! Airlines have been around for a long long time. Maybe SWA should look at keeping cost down and productivity up. Five gate agents standing around but no one can pull the jetway up because of union work rules. So we wait! Way more managment then needed with way less experience. If the employees are adults and professionals they don’t need all this supervision. Get your labor costs down and keep them down! The company will continue to make money and so will the shareholder! It really not that hard!