Southwest Airlines is considering changes to its single-class, open-seating cabins to drive up revenue, CEO Bob Jordan told CNBC on Thursday, a shift that would be among the largest in the airline's history.
"We're looking into new initiatives, things like the way we seat and board our aircraft," Jordan said in an interview after the carrier's disappointing first-quarter report.
Southwest's all-Boeing 737 fleet has a single economy class cabin and no seating assignments, though it does offer earlier boarding for a fee so customers can snag their preferred seats. The airline has focused on keeping its product simple and user-friendly for years, aiming to keep its own costs and complexity to a minimum.
Meanwhile, rivals including Delta and United have touted high revenue growth for premium seating such as business class and strong upsell rates.
Analysts have repeatedly asked Southwest about opportunities for premium seating or additional fees. (The airline doesn't charge travelers for their first two checked bags.)
Most U.S. airlines charge travelers to choose many of its seats in advance, even those that don't come with extra legroom. Eight U.S. carriers — Alaska, Allegiant, American, Delta, Frontier, JetBlue, Spirit
and United — together brought in $4.2 billion from seating fees in their domestic networks in 2022, according to Jay Sorensen, an airline ancillary revenue expert at IdeaWorksCompany.
Jordan said no decisions have been made on what kind of changes Southwest will ultimately make, but he said studies have yielded "interesting" results.
"Customer preferences do change over time," Jordan said.
While details were scarce during Southwest's earnings call, when asked whether Southwest would consider a separated cabin on its planes, Ryan Green, the carrier's chief commercial officer said: "Curtains and things like that are a bit far afield from what Southwest Airlines is."
Green added that the carrier is not considering charging for checked bags because "people choose Southwest Airlines because we don't have bag fees."
Southwest Airlines said it will limit hiring and suspend operations at four airports in the U.S. and Mexico following a loss of profits and delays getting planes from Boeing.
In a release posted after the company's earnings call Thursday, the Dallas, Texas-based budget airline reported a net loss of $231 million in the first quarter of 2024. Southwest President and CEO Bob Jordan called those losses "disappointing," and said the airline is adjusting to "slower than planned growth for this year and next."
In an interview with CNBC ahead of the earnings call Thursday, Jordan said the company was weighing options for cabin reconfiguration to address its recent revenue shortfall.
"We're looking into new initiatives, things like the way we seat and board our aircraft," Jordan told the network.
The airline said it now expects to end this year with approximately 2,000 fewer employees than 2023 through cost control initiatives, including limiting hiring and offering voluntary time off programs, not through furloughs or layoffs.
And with aircraft delivery delays from Boeing that could continue into 2025, Southwest said it is also planning to mitigate any operational and financial impacts while keeping reliable flight schedules for customers.
What airports is Southwest leaving?
After reporting financial losses in the first quarter of 2024, Southwest said it is closing operations at four airports, three in the U.S. and one in Mexico, the first time the airline has exited an airport since 2019.
- Bellingham International Airport in Bellingham, Washington
- George Bush Intercontinental Airport in Houston, Texas
- Syracuse Hancock International Airport in Syracuse, New York
- Cozumel International Airport in Mexico
Southwest also announced plans to cut about half its flights out of the Hartsfield-Jackson Atlanta International Airport and one third from the Chicago O'Hare International Airport.
Although Southwest is pulling out of George Bush Intercontinental Airport, the company will maintain operations out of the William P. Hobby Airport in Houston.
Southwest to exit 4 airports and limit hiring following profit loss, Boeing plane delays
Southwest Airlines said it is leaving four airports: three in the U.S. and one in Mexico following a first quarter profit loss.
www.usatoday.com
"The recent news from Boeing regarding further aircraft delivery delays presents significant challenges for both 2024 and 2025," said Southwest CEO Bob Jordan in the company's first-quarter financial results statement. "We are reacting and replanning quickly to mitigate the operational and financial impacts. Consequently, we have made the difficult decision to close our operations [at the four airports]."
However, in an interview later Thursday on CNBC, Jordan said that the decision to cut service to those four airports would have been made in attempt to improve financial results and would been done with or without the delivery issues with Boeing.
"The network actions have really nothing to do with the Boeing delays. We're taking network actions regardless," he said, although he added, "Now the Boeing delays are very painful. …They hurt us on the revenue front. They cause us to be inefficient."
In its quarterly financial report on Thursday, Southwest (LUV) announced it lost $218 million excluding special items, or 36 cents a share, in the first quarter. That was up from the $163 million it lost on that basis a year ago. The loss came despite record first-quarter revenue of $6.3 billion, up 11% from a year earlier. The jump in revenue came from an increase in passenger traffic, as fare data showed passengers paying about the same amount to fly every mile.
It also disclosed it now only expects 20 planes to be delivered by Boeing this year. It started the year expecting to have 79 planes delivered. Then last month it announced it was expecting 46 planes to be delivered during the year. It had already put in place a hiring freeze for pilots and flight attendants due to the reduced deliveries.
The delays in deliveries are being caused by the Alaska Airlines incident on January 5 when a door plug blew off of a 737 Max 9 jet. That prompted a three-week grounding of the Max 9, and will delay the certification of two new models of the plane, the 737 Max 7 and 737 Max 10, until at least next year. Boeing had promised to start deliveries of both those models later this year.
The financial problems at Southwest are the latest sign of the widening impact of the ongoing problems at Boeing throughout the air travel system. In its first-quarter financial report Wednesday, Boeing said it will have to keep production at a lower level likely into next year as it works to improve the quality and safety of its jets.
https://www.cnn.com/2024/04/25/business/boeing-problems-southwest-ends-service-4-airports/index.html
Cutting half of their flights out of Atlanta is a bit of a bummer for me
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