Jack Otter and the panel discuss Southwest Airlines’ loss of popularity and how they can get the situation back under control at Barron’s Roundtable.
Southwest Airlines warned its employees of upcoming “difficult decisions” as the airline faces pressure from activist investor Elliott Investment Management to increase its profits.
The Dallas-based airline’s COO, Andrew Watterson, told employees in a video on Sept. 19 that the airline’s soon-to-be-announced strategy will include changes to routes and flight network, Bloomberg reported, citing a transcript.
“There are also some difficult decisions ahead,” he said, telling staff there are “major changes coming for some cities” that are “not city closures.”
The battle between Southwest Airlines and an activist investor is heating up: Are free bags on the chopping block?
“We are trying to get more out of what we already have, but getting our costs under control will not be enough because we will not do that at the expense of employees or customers. Therefore, we need to make the necessary efforts on the revenue side to balance our profitability and balance sheet,” he said, according to the broadcaster.
Ramp agents load baggage onto a Southwest Airlines Boeing 737-800 at Baltimore-Washington Airport in Maryland. (Angus Mordant/Bloomberg via / Getty Images)
FOX Business has reached out to Southwest for comment.
The remarks come ahead of the airline’s investor day on Sept. 26, which comes amid an ongoing activist investor challenge from Elliott Investment Management, which has pushed for numerous changes at Southwest to improve the airline’s financial performance.
| ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| LOVE | SOUTHWEST AIRLINES CO. | 29.63 | +0.59 |
+2.03% |
One of the first major changes came in early September, when CEO Gary Kelly announced that he would retire next year. Southwest also announced that six other board members would retire in November.
Kelly had previously stated that the airline was “seeking significant, tactical changes to its route network, revenue management techniques, marketing, merchandising and distribution methods” and had been conducting a “thorough” analysis of its corporate strategy since last year.
On February 8, 2024, a Southwest airline plane takes off from Las Vegas International Airport in Nevada. (Mike Blake/File Photo / Reuters Photos)
Southwest announced that it will begin seat assignment this summer and will offer premium seating options in the future. It will also offer overnight flights next year.
Southwest said in July that the company would “provide further details on its comprehensive plan to implement breakthrough commercial initiatives, improve operational efficiencies and exercise discipline in capital allocation” during its investor day.
SOUTHWEST CHAIRMAN GARY KELLY RESIGNS DUE TO PRESSURE FROM ACTIVISTS
The airline posted operating revenue of $7.35 billion in the second quarter, up 4.5 percent year-on-year. Quarterly net profit fell 46 percent year-on-year to $367 million.
Southwest announced that it will begin seat assignment this summer and offer premium seating options in the future. (Adobe Stock / Fox News)
Last year the company transported over 137 million passengers.
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FOX Business’ Daniella Genovese contributed to this report.
