Southwest Airlines warns staff of ‘difficult decisions’ to be made in coming months to improve profitability

Southwest Airlines has warned staff that ‘difficult decisions’ will need to be made in the coming months if the Dallas-based carrier is to improve its financial performance and stave off a boardroom battle with the activist investor Elliott which is pushing for big changes at the airline.

In a video memo to employees, chief operating officer Andrew Watterson said staffers would likely be affected by the decisions that Southwest will need to make, although the embattled carrier did not spell out what kind of changes were on the horizon.

“We have a couple of difficult decisions heading our way,” Watterson said in the leaked video. “It’s not station closures but we need to keep moving the network to help us drive back to profitability.”

Watterson added: “I apologize in advance if you, as an individual, are affected by it.”

Southwest is due to hold its next investor day on September 26, which will include an opportunity for the airline to cover some of the changes it has already made to transform its business, as well as next steps to drive back profitability.

In response to pressure from Elliott Investment Management, which announced in June that it had acquired a significant minority stake in Southwest, the airline has already decided to axe its famous open seating policy, introduce premium extra-legroom seats, and start red-eye flights.

Employees now fear the airline will set out plans at the investor day to make significant layoffs as it attempts to cut costs and improve its share price.

Elliott has accused Southwest of doing “too little, too late” to transform its business and is calling for major leadership change. Earlier this month, Executive Chairman Gary Kelly agreed to retire following a meeting with Elliott but CEO Bob Jordan is standing firm and refusing to step down from his role.

Southwest has, however, convinced several incumbent board members to step down, paving the way to install some of Elliott’s own picks, which include the former CEO of Virgin America, David Cush, former group president of Marriott International, Dave Grissen, and the former CEO of Canadian airline WestJet, Gregg Saretsky.