Southwest will never be the same again

26.09.2024 - 18:05 / insider.com

Whatever you thought you knew about Southwest Airlines is about to change.

The airline on Thursday revealed a dramatic turnaround plan, scrapping its unique playbook of more than 50 years in favor of an airline that largely resembles most of its peers.

In a 112-slide presentation for investors, executives laid out plans for assigned seating, extra-legroom seats for purchase, a redesigned cabin, and other behind-the-scenes initiatives designed to increase revenue and turn around an underperforming stock price.

The announcements, together with an increased third-quarter revenue forecast and a new share buyback program, helped Southwest's stock price climb more than 10% in early trading Thursday. Shares have dropped nearly 50% since the pandemic decimated airline balance sheets industry-wide.

Southwest first announced plans in July to end its long-standing open seating policy in favor of assigned seats. It said 80% of customers surveyed preferred an assigned seat.

Both regular and enhanced seats will be available for selection at booking, starting in 2025 for flights in early 2026, Southwest said.

The company's unique boarding process, which relies on position numbers, will largely remain the same. It said this will maintain efficient operations while allowing its most loyal customers and passengers who book premium seats will be among the first to board

Southwest will maintain its all-economy cabin but give extra legroom to about a third of its seats, which it says is preferred among business and leisure travelers alike.

The enhanced rows will offer up to five inches of additional pitch on top of its standard 31 inches.

Southwest said the new seating options would drive demand and extra revenue, noting that they could generate similar revenue with minimal seat loss compared to adding a business class or blocking a middle seat.

In August, analysts estimated that assigned seating could generate up to $2 billion in near-term revenue.

Southwest has already announced an improved cabin with tablet holders, charging ports, upgraded overhead bins, and better WiFi.

While the seats have received backlash for their slim appearance, Southwest said they are preferred over the current ones by 400%. The airline also plans to add additional comforts like a six-way headrest and more cushioning.

The cabin improvements come as Southwest plans to cut some short-haul flying in favor of more lucrative long-haul operations.

Southwest is shaking up its route network to eliminate some less profitable routes. Atlanta and Chicago's O'Hare are among the biggest hits, both losing about a third of their flights. Southwest was the second-largest operator in Atlanta behind Delta Air Lines, leaving customers with fewer choices.

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