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.
We paid for a “Premium business class seats.” But as seats are not assigned, after boarding the numerous halt, lame, & blind(Southwest miracles), we were forced to the back. We were offered a drink voucher… Which amounted to an 8 oz plastic cocktail cup FULL of large ice cubes with about 3 oz. soda.
The seats are thin, so any item placed in the seat pocket is a gouge in the back.
Staff seem pleasant.
Cannot see me choosing Southwest again.
Southwest needs to update their various systems first before trying something new. The increased profit from ironing out the inefficiencies and having a more demand responsive pricing system will make a much greater value difference than any change in their offerings.
WN made this mess by allowing it’s preboard situation to get out of control. Just assign seats and have the preboards board after A-listers like other airlines. Simple. Their flight crews have been telling them this for years. The company created this situation by ignoring it. Management is completely out of touch with what’s happening with customers on the front line and that’s incompetent and unexceptable.
@ Air
Yes, on the plexiglass dividers. This is the best idea ever. I’m so sick of these fatties spilling over. We should be charging them for part of our seats. I’m so sick of this crap.
I gave up flying SWA when on a flight leaving out of Tampa, there were 20 folks lined up in wheelchairs so they could board first. One of these so called handicapped people got out of her wheelchair and walked halfway down the concourse to use the bathroom.
As an ex employee of SWA, I can say with certainty the leadership is laughable, and their efforts to upgrade their infrastructure in many cases became ‘make this look prettier’ instead of ‘build in redundancy and scalability’. Oh and they hired a bunch of goons from United to head their efforts. It would be a surprise if their existing leadership team would even think to go against the will of some hedge fund to preserve what little remains of the Southwest of old.
I am a Saw frequent flyer but lately, they have no nonstop flights from Tampa Bay area to NYC. What should be a 2 hr flight has now become 5 to 9 hrs with ridiculous layovers.
SWA fares are already noncommpetitive with other low cost airlines. No longer the cheapest on many routes.
I have been flying southwest for 20 years, both for business and pleasure, but I am disenchanted with two things; (i) early boarding for the so called handicapped; it is out of control and insulting and (ii) the reduced amount of non stop flights. I am considering changing to Jet Blue.
I have went away from SWA and started using Untied and others . The main reason being how they have lost control of the pre-board situation. They offer Business for A1-15 and then allow twenty plus pre- boards. Why did I waste the extra points for Business?
I fly Southwest 99% of the time and have for many years. I really hope they don’t implement this nonsense. Their seating/boarding policy is FAR superior to any other airline, seats are reasonably comfortable, I never check bags but appreciate the carryon + personal item, and do appreciate the free snacks and beverages. Fares are still much lower than their competition, although it would be nice to see more direct flights. Even the short routes seem to have layovers now. Their excellent customer service and flight policies are why I’ve stuck with them for years. Hopefully they don’t change.
I agree that SW boarding policy needs fixing. I am 77 years old and pay as much as $65 to be in boarding group A1-15. I used to pay for early bird check in instead, but having been being relegated to boarding group B too many times (after preboards, 60 A group passengers, and families with children) this was a waste of money. I have watched perfectly able individuals preboard (for which they paid nothing extra). This practice is becoming more prevalent (I fly SW at least twice a month to different destinations, so this is not an isolated observation). A sense of entitlement seems to have superseded the reason that preboarding was initiated.
I hate every airline except Southwest. As a tall person with long legs, I HAVE noticed — and appreciated:– their generous seat pitch. And I love that they don’t charge for bags or for changes. I recently had to cancel — because of a death — a trip to Juneau, where Southwest doesn’t fly,, so naturally I lost all my money on those tickets (Delta and Alaska). Airlines are tyrannical, unforgiving, greedy and despicable. Except Southwest.
And now that’s going to change just so some greedy hedge fund managers, who wouldn’t ever.fkt coach, can make even more money while sticking it to the rest of us.
I hate this. Hate it, hate it, hate it!.
These changes are horrible, especially the seat pitch! I’ve always chosen SW because the seats have more room and I can check 2 bags for free. While I haven’t seen the pre-board been abused by a lot of people, you can’t always see a person’s disability. I had back surgery and could walk fine, but was limited in what I could carry, so I had to have someone help with my carryon bag and personal item.
@Michael A. Makofske. Delta offers a credit on a future flight when you cancel, with no fee, except for basic economy. You might want to research your case. I’d rather pay a bit extra and get 34″ on a legacy carrier in the extra-legroom coach seats when flying coach over the 32″ ( 31″ in 737-700) on SW. Plus, I get an assigned seat. I am short with short legs.
I have little sypathy for short and small crybabies about airplane seat comfort. At 6′ 1″, the difference between economy on American (30 inches), Southwest 737-700 (31 inches) and Southwest 737-800 (32 inches) is clear. Adding 6 or 12 more seats will have customers screaming, without increasing revenue much. Conduct a study that will show that regular seatingʻ on Southwest is close in comfort to extra legroom on United and American., and then advertise that fact.
What other airlines charge for 3 or 4 extra inches of legroom is a ripoff. 50 years ago a similar percentage increase in fare bought you a 4 across first class seat with 38 inches of pitch. 34 inches, which is now extra legroom, was standard economy. Southwest’s product hasn’t changed in 50 years, what has changed is that everyone else’s standard economy has sunk to a level below what Greyhound and Trailways offered 50 years ago.
I have flown with Southwest for over 25 years and though I get a little disturbed about the pre-borders when I see 30 people pre boarding before Frequent flyers.
With That said…. I would still rather deal with that than these ridiculous changes some greedy people want to make. I don’t see this helping Southwest in the long run.. As far as other things that I can purchase on the flight if people feel that way, then they should fly United or Alaska or whatever and stay off of Southwest leave Southwest alone it worked!!! That’s why I’ve stuck with Southwest all these years plus their amazing crew!!
I don’t like paying for all the extras on the other major Airlines and I’ve always been proud to say that I fly Southwest. But if they change, I guess I’ll be changing also to another airline, Maybe one that doesn’t allow the plane to be filled up with pre-borders. Before the loyal A- listers customer.
They think their sales are hurting now. Wait till they take these greedy steps!! Sad days coming for SWA!!
I have been a SWA fan for nearly 2 decades and have always promoted their unique open seating as well as free bags and most recently the leg room. I flew Delta last year for first time in over 20 years and was appalled at the nonexistent leg room in the main cabin. I paid additional $45 just for an isle seat and had to pay for checked bag as well. I have been watching current airfare for an upcoming trip to Disney and SWA would normally be my first choice however there is no nonstop flight which there normally is and the flight times offered are horrible with long layovers. Not to mention the ticket prices are higher than average for September. I also can’t find price for early bird in advance – must book first. So disappointed how that part of program has changed. And now have business class fees to guarentee A1-A15. So confused thought that was part of Earlybird?As for customers taking advantage of wheel chairs just to board early- Southwest needs to require proof before customer is allowed. I have to admit this up coming trip most likely won’t be booked with SWA which really saddens me especially since I have $100 gift card I thought I’d be using. SWA you can’t have it both ways – either you become like the rest of the airlines and do assigned seating or bring back your roots of open seating with more nonstop flight options especially on flights under 3 hours, shorter layovers,5 hours and longer is ridiculous. And only earlybird option.
I agree with do many of the comments above. The preboading is out of hand. When I pay for section A 1-15 and then 12 wheelchairs are line-up with their one or two family members. When it’s my turn to board the majority of the front seating is taken right along with the overhead for luggage. Something needs to be done about this way of boarding.
Southwest sucks. Bring on a true first class cabin and assigned seats then we’ll talk. Southwest is not innovative anymore. It is a legacy airline without a premium product.
If WN becomes the same as the other US carriers, there’s no incentive to stick with. As A-listers, my spouse and I would revert to prioritizing UA or AA for domestic travel. Without their egalitarian bus in the sky approach, they’ll rapidly fail.
I have to say that Alaska Airlines was our go to for any trip at a certain time. When it became impossible to change or cancel a flight because of illness without them charging all but a few dollars of the entire fare for doing so we moved on to SW Air. We have flown Jet Blue, AA Airlines, and United Airlines cross country and will never do so again!! Hoping SW can work out the monetary problems with out making the changes that I’ve been reading about!! Only thing I agree with is requiring a document verifying that you are incapable of boarding without a wheelchair… The people that use this and don’t need it should be ashamed!