Revenue problems at Southwest Airlines were revealed this week to be even worse than we thought as the carrier faces a campaign by an activist investor to oust current management and force the airline to shift its business model to become more like American Airlines, Delta, and United.
Before Elliott Capital’s near-$2 billion investment, Southwest was already talking up changes to offer more premium products that customers would pay more for. There’s been a trend towards premium, and also long haul international, both of which the airline has been unable to take advantage of. Their product and route network haven’t aligned with what customers have most wanted to buy.
There are unconfirmed reports that seem to suggest how Southwest Airlines intends to handle redeye flying, assigned seats, and a new extra legroom section of their aircraft.
The airline would certainly issue a denial because these plans aren’t finalized in the sense that they could change, timelines could shift, and they have not been announced yet. Announcements are expected at the airline’s fall Investor Day. Consider this a work in progress, though it’s expected that the final version will fall along these lines.
Much of this is based on Enilria‘s summary of the state of internal chatter at the airline:
- Love Cabin would be extra legroom seats at the front of the aircraft. This will entail taking planes out of service to accommodate reconfiguring cabins. It’s possible that adding extra legroom seats wouldn’t reduce the number of seats per aircraft. Currently Southwest offers more legroom than standard economy compared to Delta, American or United. They do not advertise their legroom advantage versus competitors. Regular coach seating could get tighter.
- Blocked middle seats? Southwest could offer blocked middle seats for sale in Love Cabin, along the lines of Frontier, where the airline sells a seat block to both the aisle and middle seat passenger as an option. That gives them not just extra legroom but extra width as well. And the opportunity to sell that middle seat block twice, combined with Southwest’s lower than industry average load factors, could mean a boost to revenue compared to trying to sell that seat. It is not clear how firm this is in the airline’s plan.
- Redeye training for crews by end of summer to allow for limited redeye flying over the Thanksgiving and Christmas holidays. New union contracts now provide for redeye operations, though there are also technical system issues that need updating and validating. Southwest, in the past, has had to reset their systems each night in the middle of the night. Also, reportedly “there is a crew software system that also needs to be upgraded first.”
- Basic economy I’ve heard several reports that the airline is working on a replacement for their cheapest Wanna Get Away fare. Presumably these passengers would board last and have last choice of seats. In Enilria‘s version, they’d get access to seat assignments (if assigned seats are offered throughout the cabin, not just the Love Cabin) or boarding order only an hour prior to departure. Two free checked bags are so baked into Southwest’s value proposition that this could remain, although I’ve heard it both ways. There could be change restrictions introduced.
Enilria also reports that Southwest has updated its revenue management system “in recent days.” They’ve talked about an upgrade for months, and I assumed it was already in place, but they blamed their dismal second quarter revenue guidance update on their inability to adjust revenue to the current demand environment. The new system prices based on origin and destination city, rather than based on availability for each leg of a trip. This will take time to tune.
I think that basic economy is a mistake for Southwest. Their entire brand – which has tremendous value – is predicated on its democratic experience. Southwest’s stock is still heavily priced by the market, trading at outsized multiples compared to other airlines even with its current challenges. Making Southwest more like the rest of the industry, which trades around six times earnings, doesn’t seem like a path towards turning around investor returns.
However offering premium products and partnering with international airlines both seem like strong opportunities for the airline, and keeping planes in the air longer does as well. Their costs have grown substantially, and they have a revenue problem, so eking out incremental revenue against which to spread fixed costs makes sense. So does giving consumers options to buy things that they want.
As much as I’d hate to see Southwest’s generous seat pitch go, it’s not something that they advertise or that most customers realize. They haven’t been leveraging this costly arrangement to their benefit, although customers will certainly notice the difference once it’s gone. I will lament the change but it makes sense for the airline to monetize their seats rather than ‘giving away’ the extra benefit that not every customer values in terms of higher cost. The airline is likely leaving money on the table with its current generosity.
Third photo : the lady walking in the boots , with a blue shirt , is a parody of a confused female Brandon .
Just as EasyJet has transitioned from low-cost to essentially a legacy airline but with ala carte product offerings, so should Southwest. Southwest should offer 2-3 rows of business-class and also offer an expanded meal and drink program that passengers can book and reserve ahead of time. Separate themselves from the legacies by offering a meal for a nominal charge of $15.
something only southwest deals with is the taper from row 5 forward – in order to maintain 31″ in the window seats the rows are not exactly perpindicular to the aisle, they are rotated about 5 degrees, which results in the aisle seat pitch dropping to 30″ in row 2
these are the kettle’s favorite seats, so they will be unhappy with a love cabin, but otherwise i applaud the everylovingdaylights out of this move because it means YOU CAN’T SIT THERE UNLESS YOU PAY FOR IT NO MATTER WHAT
the remainder of the miracles, bridge & tunnel, ghetto, lice and delusionals can shuffle on back and i can have a workable airline with my bag over my head
bring me home herb!
Blocking a middle seat is misguided and doesn’t provide much additional comfort.
It’s more effective to wholly remove 1 row and add 6″ to 5 rows of seats. That’s a way more attractive method to collecting incremental revenue.
@ Albert — Grow up and trying being respectful. I know it is difficult when your hero is a petulant child himselff.
Excellent article with accurate analysis.
As a customer spending my own money, I don’t like losing benefits, but the company has to make money to keep flying. Times change. Twenty years ago I could pay $250 for eight one-way tickets and earn an unrestricted transcon round trip worth $300 or more. That couldn’t last either.
@Gene: Grow up and try being respectful yourself. Here’s one of your last posts: “Yeah, and then the Orange Idiot handed out trillions of dollars to everyone under the sun through PPP loans and “stimulus” checks with his name on them. Why is anyone surprised that this caused infatlion? You know inflation occirs on a lag, and The Idiot caused all of it. Now, everyone convneniently blames the current president. But, you know, people are stupid. If you think inflation was bad, just wait if The Idiot is re-elected. I predict the worst inflation in US history with no Federal Reserve independence to reign it in”. Candidly, @Albert’s comment was downright mild compared to the evil garbage that you spout.
I can envision customer training issues as all those wheelchair and families boarding first grab the extra legroom seats they didn’t pay for. I pity the flight attendants.
Seems an appropriate time to short Southwest stock.
I fly Southwest Airlines because of what it was all about in decades-past: an airline in which no one gets to be an elite snob. But groupthink leads pundits to concluding you have to have a class system. Maybe so, but that will end my “Love” for SWA. There are so many people, paid and unpaid, trying to come up with ways to extract more cash from people per square inch of aircraft. I get it. The inefficiencies and grossly inflated pay for airline employees should get just as much scrutiny, especially those in middle management on up to the top.
To me it makes sense to segregate the flights by distance. Shorter flights can have open seating and longer flights can have assigned seats. I think that would solve some of the big gripes of frequent travelers shying away from WN.
My guess is they will make the extra leg room seats a different color material and you will be able to select any “Midnight Desert” color seat in the back if you have a regular ticket while extra leg room seats in “Sonora Red” will be assigned to specific travelers buying higher fares so they can boot someone if they are seated in spot.
To help increase business and maximize corporate profits, Southwest Airlines could take marketing inspiration from Spirit Airlines’ playbook and sponsor bumfight-type entertainment, with complimentary unsophisticated gate agent behavior, at Florida departure gates and other public airport areas.
Funny that within the halls of SWA, NONE of the above is rumored. These armchair CEO’s have wild imaginations.
@Alert She’s just in shock, because she was sexually assaulted by an orange Cheeto.
The Cheeto then paid hush money, to try and win an election.
Go with the blocked seat idea. I don’t mind paying for an empty middle seat, I just don’t buy a second seat on SW and pay full fare, if the flight is over 2.5 hours I’ll fly someone else and buy business or first usually the same price as two seats on SW and I get a meal, drinks and full recline, board first and bags are included. Southwest makes it hard for me to give them my business these days.
Taking an already terrible airline and making it worse.
Nothing that has been discussed here is new or hasn’t been proposed or even suggested or discussed by WN.
It was certain that WN mgmt was working on a proposal that they intended to roll out in the fall and the EIliott involvement might push they to act sooner.
I have to wonder if they really want to call anything the “Love” cabin or section… do they really want to have the “unloved” or “less loved” cabin?
Until they offer a “first class” seat (blocking the middle doesn’t really get you more butt room unless you like sitting right on the hump), I avoid flying southwest at all costs. The “devolve” seats are extremely uncomfortable for me, even “short” flights. Gimme an F seat (ie: only 2-2 on the 737) with bigger recline, and I’ll probably take it (depending on what they charge).
mjonis,
WN is not going to add first class seats. Simply taking planes out of service to add an extra legroom section is a significant amount of effort esp. given that they have so few planes relative to what they want. Repitching coach seats isn’t terribly complex so they could do a plane a night in multiple maintenance bases.
WN isn’t going to be for everyone.
And not having someone next to you is huge…in many cases I and others prefer a standard coach seat with an empty middle seat over an extra legroom section.
and the whole purpose of adding a separate section of the plane is to make the best seats available to the highest revenue passengers and not the preboarders that make up an ailment for a day to be the rest of the crowd. The people that legitimately need help and extra time boarding will get a decent seat – but hopefully behind the wing which arrives at the gate the same time as the nose of the aircraft.
I don’t know about you but pretty much every plane I fly is near sold out so middle seat shenanigans are a moot point. I fly Southwest a lot .. It is my go to airline as I fly out of Oakland before looking to SFO ..I fly southwest because of their routes ..the seat pitch.. and the legroom that none of the others have or are very uncomfortable ..not mentioned is the fact the seats are 2 to 4 inches wider.. I love the way the planes load too…no seat assignments…take what’s there..
I don’t think it’s fair to say people don’t notice the extra pitch. It’s not even just a matter that I notice it but it’s a huge factor in why I choose Southwest over airlines whenever possible. If they close that gap, it puts them as no better than the others losing that advantage. They should market it before removing it if they feel they’re not getting their value.
How does introducing basic economy help them financially? The planes fly packed to begin with under the standard fare model
My family and I like Southwest just the way it is! Been traveling with SW for many years! Don’t change!
TJTeaxs – you are full of shit.
Southwest should not let an activist investor who likely owns a private jet screw up why people love Southwest Airlines. Turning SW into more like American or Delta would be a HUGE mistake. If SW just becomes a nickel and dime carrier their downturn in loss from costumers fleeing would be enormous.
They have to do something about their routing or they will not survive as a me too carrier.
They often fly hundreds of miles out of direct paths between origin and destination and price those high cost routes at a discount.
For example: RNO to DEN to SJD or SJD to MDW to LAS to RNO. The direct 1 stop routing is RNO to PHX to SJD and that is 6-9 hours less flying.
If they continue as a short hop airline they need to become much more efficient to stay in business as no one should be flying 2 or 3 stops on a domestic route.
Elliot will certainly load them with debt (for a fee) and put them into bankruptcy when it fails.
WN needs to figure out if they want to become Sporit or Delta.
Neither is good for the customer but at least, this “not good enough for biz travelers and too good for the cattle” area will see them die on the vine.
And for Cheeto’s sake, UOGRADE YOUR DAMN IT SYSTEMS.
Sorry for yelling…that last one is a huge obstacle they stumble over everywhere and often. Their leadership is just too self-absorbed to see this
Welcome to the ULCC world, Southwest. Spirit, Frontier, Allegiant, and Sun Country are ready for the battle.
I hope Southwest doesn’t make any major changes; the only thing that I really want them to sort out is the pre-boarding issues/abuses.
Agree on Basic Economy being a mistake if they went that route. Southwest branding is all about the friendly image and not seeming like they nickel-and-dime for everything ala ULCCs.
A full blown first class I would see struggling for the same reasons – the typical Southwest flier isn’t going to pay extra for first class. They might pick up some business travelers but not enough to make up for the seat space they removed that they now won’t sell to revenue customers. The really lucrative business travelers (what remains of them) are still going to have the lack of international partners/routes and alliance status benefits as a barrier to spending a majority of their dollars on Southwest versus any of the legacy carriers.
Extra legroom seats have a better chance of driving revenue growth without alienating their customer base and abandoning their brand image. Price the upgrade to those seats based on flight length, $35 – $100 per seat. Include them automatically for Business Select fare types. Add a few seat upgrades as a benefit to their more premium credit cards (either automatically or after spending X dollars per year) and to A-list Preferred status to drive more interest in those. Southwest could rip out one row of seats and rearrange to get 5 – 6 rows of extra legroom, plus they can up-charge for the bulk-head and exit row seats that have that legroom now, which seems like a net positive on total revenue.
Otherwise the main Southwest issue is they need to shore up operational issues from their antiquated systems. More than anything their reliability with the Christmas and other meltdowns are driving customers away. A perfect example, our family flew Southwest to Seattle for a cruise last year. The cruise and airport share one port authority that can handle bags between the two. All other major airlines had options to check bags from your cruise ship right to the airport if you had a flight home after the cruise within 12 hours, allowing you some time to explore Seattle and not have to haul big bags all the way back. Southwest couldn’t do it if your flight wasn’t within 3 hours. Instead of having that last day available to relax in the city we had to go the airport with all our checked bags and then sit pre-security with 100s of other Southwest passengers as we couldn’t check bags even at the airport until 3 hours before departure. SeaTac pre-security is garbage with no lounges, no restaurants, and almost no seating. That single experience has pretty much flipped us entirely to AA fliers out of our hub (Phoenix).
I paid extra for early boarding. To my surprise I got B1 & B2 for my hubby and I. So now I’m piseed. Paid extra money, only to let the freebies, aka, family boarding to board ahead of me. .?? Where is the fairness with Southwest.
What a stick-it to a regular customer. NEVER WILL I DO EARLY BOARDING AGAIN. YOU SCREW REGULAR CUSTOMERS THAT WAY
It seems ironic that folks with no practical airline experience now want to drive the bus. Isn’t that what got most of the legacy full-service carriers into trouble? Letting the bean-counters call the shots?
Southwest’s value proposition is three-fold:
1. Two free checked bags
2. Greater leg room throughout the aircraft
3. A simple fare structure that almost anyone can understand.
Their challenges are primarily their level of automation and their ability to respond to changing market conditions.
Mess with their value proposition, and they lose their signature appeal. Anything the new investors propose must be an enhancement to what Southwest already does well.
Ive already cut back my trips with Southwest out of DC due to rates tend not to be much less if at all for my destinations. Plus seems like less non-stops (I.e. Orlando, Atlanta. Tampa).
If they are going to have basic fares that have you load last, might as well fly legacy airlines
I can see Southwest Airlines going bankrupt if they become like the AA, UA and DL.
We generally prefer Southwest when we fly domestic. I’m willing to pay for earlier boarding as even with the “miracle flights” we always seem to get decent seats together. The one thing that would push me to another carrier would be if they decreased the seat pitch. Although if they offered an extra leg room section for a reasonable cost, I would probably take advantage of it.
Seriously y’all . . . curtail your daytime drinking if you’re going to post comments.
With the most recent contract in place, red-eye flights were not addressed for the flight attendants. It is still a huge gray area. As for the suggestions of meals for long flights, there is literally no room for storage or preparation of meals. The way the galleys are configured there is not room for a flight attendant’s water bottle. Meals are a moot point. Passengers are oversized and no matter what the seat configuration, they occupy one and one half seats while only purchasing one. Elliot has their heads up their rears with all their suggestions:
I’ll be glad to see changes even if it costs more. So tired of paying for earlybird only to have 10 families in front of me that didn’t pay anything extra to board before me. Even the handicapped seating dilemma doesn’t make me as enraged.At least they can’t sit in the exit rows. We stopped flying southwest because the rage was real. I still have points I need to use but not paying for earlybird again.
Two free checked bags and open seating are two things that make Southwest Southwest. The fact that Southwest now has slightly more economy class legroom (not economy plus) than all other carriers except for Jet Blue should also be given more emphasis as another distinctive. If Southwest messes with two bags fly free and open seating, that would alienate a significant slice of the people who fly Southwest including the undersigned.
Southwest has become an irritation as of late when flying. I’ve encountered the “seat saving” shenanigans on my last two flights for which I had to counter bully the perpetrators.
Want to fix the situation:
– Assigned seating for ALL!!
– Big Seats like Spirit or Business Class seats (middle seat blocked) like some small Euro airlines
– Business class is the first to board
– Complementary cocktails and extra snacks (not meals) for business class
– Don’t call it Love Seats, call it LUV seats
– Want to Get Away tickets only allowed one free bag
– Red Eye service, but only to other large hubs, not small towns
– Board the “Jesus Jetway” gang after group Five or Six or Seven or……..
Southwest is leaving money on the table with its current business model. Needs to catch up!!
@Joe, I have flown European business (middle seat blocked out) on narrowbodies multiple times. I’m indifferent between that and a 2-2 first class. Of course, the real beauty of European business is they don’t seem to upgrade coach passengers to the business section. Last time, I was the only business-class passenger. For full information, I would be unlikely to pay the premium they want for EB on intra-European flights. I get it because I do pay for J across the Atlantic.
@TedPoco: “I can envision customer training issues as all those wheelchair and families boarding first grab the extra legroom seats they didn’t pay for.” I can’t envision SW having extra legroom seats without having seating to those (and likely the entire plane) assigned.
@MARIE PAYNE: “not mentioned is the fact the seats are 2 to 4 inches wider.” SW has the same 737s others have, not a TARDIS. All US carriers have wider seats in their narrowbody Airbus and Embrarer fleets (plus the 717). Aerolopa has SW at 17.6″ and UA at 17.5″ in the MAX8.
After all these years of very successfully existing in their own little world, it’s finally catching us to WN and it’s about time! The today’s financial realities are catching up with them; they have had operational meltdowns’; IT systems are stone age and more and more inflight issues.
As a departed former legacy carrier CEO said:
“They need to put every aspect of the airline through a major car wash!”
With Business Select, a person is paying about the same as a legacy carrier on any given route. What exactly is that person receiving for the price? I’ll take the premium cabin and better on-time record of a legacy carrier every single time. (Never mind lounge availability.)
SWA will just become another airline if it simply becomes a wall street MBA monetization scheme. It will remove its competitive advantage.
Here’s the answer, f**k the shareholders and put that money into real comfort and service to passengers. Southwest would quickly make more money than they know what do do with, and, the shareholders get more as well over the medium-to-long term. Generally speaking, EVERYONE HATES THE FLYING EXPERIENCE, it’s time for someone to break the mold instead of emulating each other in pursuit of extracting every last nickel from every last passenger, comfort and dignity be damned. The only reason that works to the extent it does is because of the lack of competition. And it all SUCKS.
This ‘family boarding’ abuse nonsense has driven me away from SW. Certainly, senior mgmt knows this is a problem that needs to be addressed? A solution? Make the first 18 rows ‘premium’ and allow ‘pre-boards to take any seat after row 18- watch the abuse drop way down.
Been a 100k mile plus southwest customer for 8 years. They currently assign priority status at just 35k miles flown. I always thought that was way too low- priority plus is 70k plus miles flown. The only difference is 2 free drinks plus free internet. -as a priority flyer you get A tickets status no matter how late you buy your ticket. They need to bump this to 50k. Min miles. Too many people qualify for priority. with the low bar –
I won’t fly Any airline that cannot guarantee that I won’t be stuck sitting in a middle seat. And many others are similar.
This is of course because they allow people to spill over into the middle seat. It’s unfair and uncomfortable for them to get away with selling sometimes two portions of the middle seat twice or three times.
Plexiglass dividers between seats would be amazing to enforce this.
Happy to pay fairly to get any other available seat though.
I fly SWA exclusively so I can get to A list preferred for early boarding and free wi-fi. If they change the perks I can just as easily fly American. I think a lot of business travelers and long term customers will be upset. Oh well.
Southwest needs to implement ALL of the recommendations mentioned in this article. It should also consider merging with Canadian airline Porter which would offer more premium options to its travelers, expand its international footprint, capitalize on the seasonal travel market, and expand its presence at the thirteen US cities which Porter Airlines flies out of to their Canadian destinations.