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Southwest Airlines unveiled its turnaround plan on Thursday as pressure mounts to stem losses.
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The airline’s new strategy includes a redesigned cabin, assigned seating, and route changes.
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Checked bags will still be free, Southwest said.
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.
When and how Southwest’s famous open seating will disappear
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 unveils its version of premium-economy
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.
New and improved cabin
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.
Restructuring its route map
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.
Southwest left four airports altogether in August: Bellingham International Airport in Washington, Mexico’s Cozumel International Airport, Houston’s George Bush Intercontinental Airport, and Syracuse Hancock International Airport in New York.
Those cuts free up space for more profitable routes, such as six new flights from Nashville and its first-ever red-eye flights in early 2025.
Southwest said the restructuring will improve its network connectivity and efficiency.
Behind-the-scenes improvements
Southwest is adopting many strategies of its so-called mainline peers in an effort to tap into new revenue streams. Specifically, the airline said it wants to establish international partnerships to expand its overseas operations and generate more demand.
Its first partner will be Icelandair, with its first flight scheduled in 2025 through Baltimore-Washington International Airport. This means Icelandair passengers can connect in the US on Southwest flights, and vice versa. Southwest said Icelandair is just the start, with at least one more partner to be announced next year.
Southwest also wants to improve its “turn time” — or how long a plane sits at the gate between flights — and commit to a 24-hour operation to better utilize its fleet, freeing up more aircraft to operate more flights beginning next year.
Customers can also expect technology improvements, the ability to book full vacation packages, and changes to the airline’s Rapid Rewards loyalty program. Details of the updates remain vague, but Southwest said top-tier status holders will gain more perks, and eventually, the program will extend to international operations once airline partnerships are in place.
Free bags are here to stay
Despite pressure from an activist investor, Southwest is not giving up its famous two free checked bags. The airline said research shows the fan-favorite policy is the most important thing that sets it apart from the competition.
It said removing the unique strategy would lower demand and “far outweigh any revenue gains created by imposing and collecting bag fees.”
In 2023, global airlines made $33 billion in bag fee revenue.
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Source Agencies
