Southwest Announces Major Route Changes Ahead of Turnaround Plan Reveal

• Southwest Airlines is reducing unprofitable routes and cutting its footprint in Atlanta.
• The airline is facing external pressure to enhance revenue and minimize expenses.
• Further details are expected to be released during the investor day scheduled for Thursday.

In a significant move, Southwest Airlines is eliminating unprofitable routes as it faces mounting pressure from an activist investor to enhance revenue and reduce costs.

As reported by CNBC, the airline plans to cut around 340 pilots and flight attendants from its Atlanta base due to decreased bookings, forcing a reduction in service. This decision has been confirmed by a company spokesperson, who noted that these changes would not take effect for six months.

The spokesperson also highlighted delays in new aircraft deliveries, tied to ongoing issues with Boeing’s 737 Max. “We continue to optimize our network to meet customer demand, best utilize our fleet, and maximize revenue opportunities,” the spokesperson elaborated. “Decisions like these are difficult for our company because of the effects on our people, but we have a history of more than 53 years of ensuring they are taken care of.”

Bloomberg reported that the airline’s strategies would lead to a reduction of about one-third of its operations in Atlanta, decreasing weekly flights from 567 to 381 and eliminating service to 16 cities altogether.

This reshaping of operations at Southwest, which stands as the second-largest operator in Atlanta after Delta Air Lines, will provide customers with fewer options from the world’s busiest airport.

The changes in Atlanta reflect a wider trend of network adjustments. Earlier this year, in April, Southwest announced a plan to cut a third of its flights from Chicago O’Hare, an airport they began servicing in 2021 after previously favoring the smaller Midway airport.

In August, the airline also exited four airports as part of its cost-cutting and restructuring initiative. These included Bellingham International Airport in Washington, Cozumel International Airport in Mexico, George Bush Intercontinental Airport in Houston, and Syracuse Hancock International Airport in New York.

Despite reducing its network size, Southwest is augmenting its flight offerings where it perceives a competitive advantage. The airline indicated plans to introduce six new routes to and from Nashville and schedule red-eye flights from Hawaii to the mainland U.S. starting in April.

Southwest’s evolving strategy comes amid broader industry challenges, particularly as Elliott Investment Management, a hedge fund with a substantial stake in the airline, advocates for operational changes.

In July, Southwest announced it would discontinue its longstanding open-seating policy and start selling premium seating options. Additionally, the airline has committed to upgrading its outdated technology, which previously contributed to a substantial operational meltdown in December 2022.

Further announcements regarding changes are anticipated during the investor day on Thursday.

It seems likely that the low-cost carrier, recognized for its open seating policy and provision of two free checked bags, will transition to a more mainline carrier model. This shift aligns with Elliott’s vision for enhancing profitability and enriching the customer experience.

Correction: September 25, 2024 — An earlier version of this story misstated the frequency of Southwest’s flights into and out of Atlanta. It reportedly plans to operate 381 flights weekly, not daily, down from 567 weekly flights. The story also misstated when Southwest is set to start red-eye flights from Hawaii; those routes will commence in April.

Source: Business Insider