It’s a big week for Southwest Airlines as they’re expected to officially announce how they plan to switch up a business model that has always set it apart from its competitors. The changes are expected to be rolled out over the next year.
The next 48 hours are critical for the Dallas-based airline. The experience that travelers have grown to love, or hate, is expected to change drastically within the coming year.
Leslie Josephs is the airline reporter at CNBC.
“They had this very simple business model. One class of service. One kind of plane. And what they’re doing is trying to increase revenue and become a little bit more like the other airlines, the American Airlines, Delta, United,” said Josephs.
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Why the changes, though? Some answers can be found in an internal memo obtained by CNBC, in which COO Andrew Waterson said Southwest is under pressure to increase profits.
“There’s an activist investor, Elliot Management, and they are essentially calling for leadership changes at the airline,” Josephs said. “They were profitable for so long and that’s kind of an outlier in an industry that’s had boom and bust cycles for decades. But what the investors, or at least this shareholder, want to see is bigger returns of course.”
Already, Southwest said it would move away from open seating to assigned seating. They’ll also start selling red-eye flights and premium seats with more leg room. And they’ve started showing up on search engines like Kayak.
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This week, here in Dallas, Southwest will officially unveil its plans. On Wednesday we could get a better look at where Southwest will fly and where they will not by next year’s spring and summer months. Thursday is considered the big day. Investors and shareholders are expecting details about how Southwest will execute impending changes.
The airline said furloughs aren’t expected but Josephs said some bases could close, forcing tough decisions on employees. Overall, she says this is likely one of the most pivotal moments in the airline’s nearly 60-year history.
“That’s going to be very key for the stock price, for how investors view the airline,” she said. “And for consumers, they’re going to get a better view of what Southwest’s strategy is for next year and the years after that.”
Southwest leadership called it a “delicate balancing act.”
NBC 5 plans to be at Thursday’s investors meeting and will bring you the latest on-air and online.
