Southwest Airlines will end its signature “open” seating model and offer premium seating options as it seeks new revenue sources to address concerns around the business’s performance.
It made the announcements as chief executive Bob Jordan outlined second-quarter earnings that “fell short of what we believe we are capable of delivering”.
Southwest’s net profit fell 46% in the April-June period to $367 million. Its operating profit was down 50% at $398 million on revenue up 5% at $7.5 billion.
“We are taking urgent and deliberate steps to mitigate near-term revenue challenges and implement longer-term transformational initiatives that are designed to drive meaningful top and bottom-line growth,” Jordan says.
Jordan had hinted in late April that the carrier was considering “transformational” changes to its cabin, after it recorded a first-quarter loss.
Southwest says its research shows that the vast majority of its passengers prefer the idea of assigned seating. The move brings to an end the “open seating” model that Southwest has been known for throughout its history.
Its premium seating option will involve “extended legroom” seats that will account for around one third of the total seats on offer. Southwest says specific cabin layout details are yet to be firmed.
The airline will also introduce “redeye” flights and redesign its boarding processes as part of the transformation effort.
Southwest says it will release more details – including on timings – on the new products in September.
The moves comes as United Airlines chief executive Scott Kirby continues to insist that a structural change is under way in the US airline market, where his carrier, along with Delta Air Lines, are prospering at the expense of budget carriers – a dynamic reflected in the earnings at Southwest and other US low-cost carriers in recent quarters.
It also follows strong criticism of Southwest’s leadership and management from investors including Elliott Investment Management, which earlier this month characterised the company’s board of directors as “profoundly out of touch” with investors. It had previously called on Southwest’s leaders to be replaced, while adding that the business ”represents the most compelling airline turnaround opportunity in the last two decades”.
