Southwest Airlines have unveiled their vision for Southwest 2.0, an airline that for the first time will give passengers assigned seats, charge them extra for more legroom, and offer red-eye flights. And bags still will fly free.
The airline will also repackage its sale of vacation packages. It will seek partnerships with international airlines, starting with Icelandair next year, that executives say will make Southwest credit cards and frequent-flyer program more attractive.
The changes will amount to the biggest ever at Southwest, which is the original low-cost airline but is now well into middle age and suffering from sagging financial results.
Southwest executives pitched the new offerings as they came under increasing pressure from an activist investor who wants to replace the airline’s management and force a review of its strategy. Southwest’s annual profit is on pace to decline for a third straight year, and its stock price has fallen by more than half since early 2021.
“Our model is not broken,” CEO Robert Jordan declared, but he said it needs tweaking and “enhancement.”
Southwest said its multi-year plan, including changes to its flight network, will add about $1.5 billion in pretax earnings in 2027.
Southwest had previously given the outlines of changes including assigned seating and extra-legroom seats, but it gave more details about them last week.
Executives detailed how each of Southwest’s four airfare tiers will come with perks that get better as the price rises. Executive VP Ryan Green said the cheapest fares will not allow customers to pick a seat when they book a flight, which could increase the incentive for consumers to move up to the next fare level.
Jordan said it will take time to make significant changes at an airline with 800 planes.
Southwest’s reservation system is capable of handling assigned seating, Jordan said, but “we have dozens and dozens of other systems of the company that are geared for open seating … and those have to be changed.”
“There is a lot of risk if you do this poorly,” the CEO said.
Southwest stopped short of changing another of its longtime characteristics: letting passengers check up to two bags for free, a break from fees that are charged by all other leading US airlines. Executives said it’s the most important feature in setting Southwest apart from rivals.
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