Southwest Airlines is cutting nearly a third of its flights to and from Atlanta, a blow to the city and its employees.
It comes just a few days after the carrier warned that the company will have to make a number of “difficult decisions” in the coming days as part of a plan to restore profits.
The flight cuts, announced in a memo on Wednesday morning, come at a time when the future of the airline’s passenger-friendly policy is in jeopardy.
Changes will reduce the number of employees needed in Atlanta, but no jobs will be lost. Staff will have to move to another hub.
Flights to or from the city will drop from 567 a week to 361 in April, the airline said on Wednesday, while flights to the city will drop from 37 to 21.
The airline is desperately trying to cut costs while fighting Elliott Investment Management, a powerful hedge fund that has amassed a 10 percent stake in the airline, is demanding measures to cut costs and increase profits.
Southwest has already said it will end its popular open-seating policy after half a century, and will soon start charging passengers to select a seat instead.
In addition to a management change, Elliott is demanding that the iconic Southwest ‘bags fly free’ benefit expires – as the activist investor says, charging baggage fees will generate tens of millions of dollars in revenue.
Southwest Airlines has warned it will have to make a number of “difficult decisions” in the coming days as it works to restore profits
These schedule changes take place ahead of the Investor Day on Thursday.
CEO Bob Jordan is expected to present a plan to restore the airline’s long-term profitability, a standard expectation for the airline before the pandemic.
The proposed changes include plans to move to assigned seating and extra legroom seating.
The move was announced earlier this summer, but tomorrow Jordan will explain how Southwest plans to execute it.
These are higher-margin offerings that competitors such as Delta and United Airlines started doing years ago.
The new moves are being announced at an investor day in Dallas, where investors like Elliott are vying to oust CEO Bob Jordan and form a new board with nominees of their own.
Southwest, which once posted 47 consecutive years of profits before the pandemic, is now struggling to regain sustainable profitability. Interviews with analysts, investors and employees suggest that the airline’s long-running success may have led to hubris and stubbornness among its leaders.
“They’re way too ingrained and … way too obsessed with ‘we’ve got to do it the Southwestern way,’” said Rob Britton, a professor at Georgetown University.
A Southwest spokesperson responded to the criticism, saying the company typically doesn’t make decisions unless there is data to support them.
“Southwest has always made very deliberate decisions when it comes to the markets it serves and its business model,” the spokesman said.
The airline has already withdrawn passenger-friendly measures such as open seating, in a bid to stave off changes demanded by activist Elliott Investment Management.
The new moves are being announced during an investor day in Dallas, as investors including Elliott seek to oust CEO Bob Jordan and form a new board with their own nominees.
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.
Elliott said Jordan and Southwest’s future former chairman Gary Kelly refused to change the airline’s business model, explaining the recent changes after Kelly stepped down on Sept. 10.
A report released earlier this year found that airlines including Delta, United and American raked in a whopping $33.3 billion in baggage fees alone 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.