Southwest Airlines has warned it will have to make a number of “difficult decisions” in the coming days as it works to restore profits.
The announcement, sent to employees on Thursday, comes as the future of the airline’s “baggage flight benefit” remains uncertain, with customers having been paid no extra fees for their bags for more than 50 years.
This advantage was previously bolstered by other passenger-friendly measures, such as free seating, which were recently scrapped as the airline tried to stave off changes demanded by activist Elliott Investment Management.
Apparently that wasn’t enough, but Chief Operating Officer Andrew Watterson told employees in a video that the worst is yet to come.
Scroll down for the video:
Southwest Airlines has warned it will have to make a number of “difficult decisions” in the coming days as it works to restore profits
The announcement, sent to employees on Thursday, comes as the future of the airline’s ‘baggage flies free’ scheme remains uncertain – after customers have been exempt from paying baggage fees for more than 50 years
“There are some tough decisions coming up as well,” Watterson said, Bloomberg reported on saturday
“No citywide shutdowns,” the C-suite executive continued.
But you know, for some cities the changes are bigger.
“I apologize in advance if this causes any inconvenience to you as an individual,” he added. He did not provide details, but said Southwest would release a revised flight schedule on Wednesday to reflect the changes.
Southwest said in a statement that the video is part of a series of regular presentations the COO sends to employees.
Meanwhile, the day after the new schedule was sent, the airline [posed to detail changes already made to drive up profits aside from changes to its route and flight network.
This includes the introduction of assigned seats, after more than a half-century of freeform seating that had set Southwest apart from the pack.
The new steps will be announced during an investor day in Dallas, as investors like Elliott fight to oust CEO Bob Jordan and instill a new board with its own nominees.
The carrier has already pulled passenger-friendly policies like open seating, as it attempts to fend off changes demanded by activist Elliott Investment Management
The new steps will be announced during an investor day in Dallas, as investors like Elliott look to oust CEO Bob Jordan and instill a new board with its own nominees
COO Andrew Watterson, seen here delivering testimony to the US senate at a 2023 hearing designed to Strengthening Airline Operations, was the one to tell employees the message
‘We’re trying to get more out of what we already have, but getting our costs under control is not going to be enough,’ Watterson reportedly told employees this past Thursday.
‘[B]Because we are not going to do this at the expense of our employees or customers.
‘[I]It has to be on the revenue side that we create the traction to bring our profitability and balance the equation.’
Elliott, one of the airline’s largest investors, argues the company’s business model is failing to meet changing consumer demand for more premium products.
Bonuses such as free baggage and free seats that are inextricably linked to the airline’s image appear to be part of the company’s concerns, as the airline has also adapted its advertising to target younger consumers.
This is a response to the seats that have become empty since the pandemic, partly because business people are traveling less than before.
Elliott said Jordan and Southwest’s soon-to-be former chairman Gary Kelly refused to change the airline’s business model, explaining the recent changes after Kelly stepped down on Sept. 10.
Elliott has said that Jordan and Southwest’s soon-to-be former chairman Gary Kelly (pictured here) have refused to change the airline’s business model, hence the recent changes after Kelly stepped down on Sept. 10.
Southwest said in a statement that Kelly will step down from his role at the airline’s annual meeting next spring.
The airline said six of the remaining 14 directors will step down after the November board meeting, but did not specify who.
The company will appoint four new independent directors to take their place. The fate of board member Jordan is also uncertain.
A report released earlier this year found that airlines including Delta, United and American raked in a whopping $33.3 billion in baggage fees last year, a whopping 15 percent increase from $29 billion in 2022.
This amount consists solely of charges for larger hand luggage, standard charges for checked baggage and fines for overweight or oversized checked baggage. Last year, this amount accounted for 4.1 percent of the global turnover of airlines.