Southwest Airlines details plans to fight off activist investor Elliott Management

Southwest Airlines is launching a new plan to return the carrier to profitability and has added a new director to its board, amid an ongoing battle with activist investor Elliott Investment Management.
Ahead of Southwest’s investor day Thursday, the Dallas-based airline unveiled a three-year plan to transform its business model. Some of the carrier’s new initiatives include: assigned seating, premium seating options, boarding changes, global airline partnerships, vacation packages and updates to its rewards program. Just this week, Elliott had announced it would launch a proxy fight “as soon as next week” in an effort to ignite a fire under Southwest leadership ahead of a meeting with shareholders.
“We are changing very rapidly, all the while staying true to the core values that have made Southwest a disruptor and leader for decades,” CEO Bob Jordan told investors at a presentation Thursday. “But up front, I want to acknowledge that recent financial performance is not up to your or to my expectations.”
On Thursday, Southwest held an investor day to discuss core changes to its operation and new perks for customers based on research. The airline has had a whirlwind summer after Elliott’s demands for change and delivery of returns for shareholders.
Stay prepared. Receive the latest airlines news, delivered straight to your inbox.
Or with:
By signing up you agree to our Terms of Service and Privacy Policy
Assigned seating was a “resounding message” from Southwest’s research, which showed it was the largest opportunity to broaden the airline’s appeal, according to Ryan Green, executive vice president of commercial transformation at Southwest. Assigned seating will start being sold in the second half of next year, and ready to fly by the first half of 2026.
“We were struck by how clear the message was,” Green told investors. “There is an absolute need for us to evolve our model to better meet customer preferences.”
Similar to today, Green said, customers will purchase a ticket on Southwest as part of a bundle. Graduated seating and boarding benefits will be included in the fare bundles. Seat maps will be provided during the booking process, and seats with extended legroom or a preferred seat in the front of the cabin, he said.
Green said the airline expects to about one-third of seats on planes will have extended legroom.
To do so, he said, the airline won’t remove any seats on its 175-seat aircraft but instead shift from its 32-inch standard seat pitch down to the 31-inch seat pitch that the company has on its Boeing 737-700 fleet. To add leg room on the 737-700s, Southwest will remove a row of seats, leaving planes with 137 seats instead of 143.
“With early work, we believe these premium seats will drive more ancillary revenue per passenger,” Green said.
If a customer doesn’t want to choose their seat in advance, Green said, they can purchase the airline’s lowest fare without paying more. A seat will be assigned for those customers at check-in.
Southwest has begun the work to get the certification of its cabin reconfigurations from the Federal Aviation Administration, a process that takes months to complete. It plans to start retrofitting cabins in the first quarter of 2025, completing 50 to 100 retrofits a month, Green said, reducing that pace during the high-demand travel period of summer, but on track to complete by the end of 2025.
Boarding will look similar to today as customers will still receive a boarding position number and lineup. Southwest customers who purchased at the highest fares will board first. Green said the airline has live-tested boarding methods and simulated over 8 million flights.
It’s also adding Icelandair as its first international partner, with mutual customers flying in the first half of next year. The first U.S. gateway the airline will exchange customers through will be in Baltimore. Throughout next year, Green said, Southwest will expand the number of U.S. gateways on its network.
The vacation product will launch mid-2025, Green said. About 40% of vacation packages purchased by U.S. travelers are to six markets, including Las Vegas, Orlando, Fla., Hawaii and Cancun, where Southwest has a large presence.
As for updates to the rewards program, Southwest plans to expand what customers can earn and redeem Rapid Rewards points for. There will also be new benefits to increase engagement and loyalty, giving A-List and A-List preferred customers access to better seats and better boarding positions.
“We intend to broaden our appeal with assigned seats of premium seats, and that will attract new customers,” Green said. “In turn, that will grow our Rapid Reward membership and grow credit card acquisitions.”
Eventually, Southwest customers will be able to earn and redeem Rapid Rewards points to long-haul international destinations as Southwest expands its list of airline partners, Green said.
Also, the airline next month will add itself to Skyscanner, another tool for travelers to compare prices and book flights. Southwest joined other major airlines on Kayak and Google Flights earlier this year.
One thing Southwest remains firm on is that bags will still fly free. Many Southwest customers indicated that not having to pay for the first two checked bags is a big reason they use the airline.
Southwest will also focus on cost savings. Some initiatives include minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities and improving corporate efficiency.
This week, Southwest announced it would cut down on its presence at Hartsfield-Jackson Atlanta International Airport, displacing employees based at the world’s busiest airport by passenger traffic.
In April, Southwest announced that effective Aug. 4 it would cease operations at Bellingham International Airport in Washington state, Cozumel International Airport in Mexico, Houston’s George Bush Intercontinental Airport and Syracuse Hancock International Airport. The airline also announced it would reduce capacity at both Hartsfield-Jackson Atlanta International Airport and Chicago O’Hare International Airport. Jordan said those markets weren’t “performing,” which was the deciding factor.
Compared to April 2023, Southwest’s schedule for April 2025 will have about 10% fewer routes, chief operating officer Andrew Watterson said. Meanwhile, about 10% of the carrier’s routes are new. However, Watterson said, about 45% of the routes have had capacity adjusted to an extent greater than 25% overall.
Southwest is also moving its international gateway from Fort Lauderdale, Fla., to Orlando, Watterson told investors.
The company’s growth, Jordan said, will develop from initiatives like fast turns between flights and red-eye flights.
Turn improvements will focus on removing problems and unnecessary tasks by leveraging technology, Watterson said.
“The paperless turn uses multiple new systems to replace paper, obviously,” Watterson said. “Besides less time printing and fewer errors, it eliminates multiple trips up and down.”
Overnight flights had been long rumored for the air carrier, but they won’t be operating at Dallas Love Field.
Red-eyes, announced in July, will begin with five initial nonstop routes: Las Vegas to Baltimore and Orlando; Los Angeles to Baltimore and Nashville; and Phoenix to Baltimore. Those flights are scheduled to depart between 11:30 p.m. and 1:45 a.m. Central time.
This week, Southwest announced it would add new red-eye flights: Honolulu to Las Vegas; Honolulu to Phoenix; Kona (Hawaii Island) to Las Vegas; Kahului (Maui) to Las Vegas; and Kahului (Maui) to Phoenix.
The carrier is also modernizing its fleet of Boeing 737 jets with a goal of reaching an average fleet age of five years in 2031.
Jordan said Boeing delivery delays have created significant issues for Southwest. Multiple carriers, including Southwest, have lowered expectations for aircraft deliveries after all of the operational problems at the plane manufacturer, not to mention a recent strike by its machinists union workers.
“Boeing has delivered very few Max aircraft on time, and we, of course, are still waiting on the Max 7 certification,” Jordan said.
With the new changes, Southwest has learned it is serving more passengers for leisure than before the pandemic.
Unique business travelers, such as those dealing with hybrid office schedules, are changing how they have traditionally booked, Watterson said. Technology, he said, is also playing a role, because business travelers can now take meetings virtually rather than taking a Southwest flight for an in-person meeting.
Another change includes appointing Robert Fornaro, former CEO of Spirit Airlines, to the board of directors. An airline executive with four decades of experience, Fornaro was a consultant to Southwest from 2011 to 2014 after its acquisition of AirTran in 2011, and from 2020 to this year after his resignation as Spirit president and CEO.
The announcement comes after Southwest said seven directors would retire from the board, including executive chairman and longtime leader Gary Kelly. Elliott had pushed for 10 candidates to the board, but Southwest has said it will only consider up to three of them.
“Our model is not broken, but it is in need of continued collaboration and enhancements,” Jordan said.
This week, Elliott alerted shareholders of its plan to call a special shareholders meeting, since the hedge fund has reached the 10% common share threshold required under Southwest’s bylaws. Elliott encouraged shareholders to prepare.
Rob Britton is a retired American Airlines executive who now teaches marketing and strategy at Georgetown University. He said it’s important to remember Elliott is a minority owner of Southwest.
“Elliott’s input in the past weeks seems to have been a strong wake-up call to Southwest, and they’re clearly taking steps to change the company — for example, to begin offering assigned seats, partnering with Icelandair to extend their network to Europe, and more,” Britton said.
He also added that Elliott’s candidates were “solid,” but it “looks like [Southwest] believed that Elliott was seeking influence greater than their ownership position,” Britton said.
Jordan acknowledged Elliott’s demand for a proxy fight, disagreeing with the hedge fund’s aggressive moves to change the airline.
“We refuse to let anything distract us from running a safe and reliable operation, and I refuse to let Elliott distract from executing our plan,” Jordan said.