Southwest Airlines has confirmed that it will keep its beloved ‘bags fly free’ policy after extensive research found that it was the “most important feature by far” that setting the Dallas-based carrier apart from its rivals.
The announcement was made during Southwest’s annual investor day on Thursday, where the embattled carrier set out more detailed plans to turn around its lacklustre financial performance.
Southwest’s management team will be hoping that the plans unveiled on Thursday will be enough to convince shareholders that the airline’s incumbent leadership are the right choice to stay at the helm as activist investor Elliott pushes for major boardroom changes.
During the investor day, Southwest reiterated some changes that had already been announced in the summer, such as assigned seating and premium extra legroom seats, while setting out new plans such as inking partnerships with international airlines and improving operational efficiencies.
Fending off criticism from the likes of Elliott, Southwest CEO Bob Jordan commented: “We’re now ushering in a new era at Southwest, moving swiftly and deliberately to transform the Company by elevating the Customer Experience, improving financial performance, and driving sustainable Shareholder value.”
Jordan said that Southwest will begin to sell assigned seating from the second half of 2025 with the airline’s open-seating model coming to an end at some point in the first six months of 2026.
At the same time, Southwest will begin selling its premium extra-legroom seats, with roughly one-third of seats offering up to five additional inches of pitch.
Southwest intends to maintain a similar boarding system as it has done for years, but the process will be updated so that frequent flyers and customers who have purchased premium seating are given priority boarding.
In addition, we learned on Thursday that Southwest intends to ink partnerships with international airlines in a bid to feed more passengers into its network. Southwest has already signed a deal with Icelandair and hopes to secure a second deal within the next 12 months.
The Icelandair agreement will see the carrier feed passengers into the Southwest network through its hub at Baltimore-Washington International Airport and additional airports are expected to be announced soon.
Southwest also intends to drive incremental revenue by launching a new vacation package service called Getaways by Southwest, while changes are also coming to Southwest’s Rapid Rewards program in an attempt to drive improved loyalty to the airline.
While many of Southwest’s focused on customer experience improvements, the airline also announced much-needed plans to “mitigate cost pressures and modernize processes.”
From next February, Southwest will begin red-eye flights for the first time and the airline is looking at ways to reduce the ‘turn time’ between flights in order to drive increased aircraft productivity.
Over the next few years, Southwest hopes to save around $500 million through a variety of cost-cutting initiatives, including reducing hiring and “optimizing scheduling efficiency.” The airline hopes to save a further $500 million by monetizing its fleet order book.
Elliott didn’t immediately respond to Southwest’s latest turnaround plans, but when the carrier initially announced plans to ditch open seating and introduce premium seating, the activist investor blasted the ideas as “too little, too late”.
On Tuesday, Elliott sent an open letter to shareholders, warning that it planned to call a special meeting within weeks in an attempt to push for leadership and board member change.
Elliott has repeatedly called for Jordan to step aside, something that the incumbent CEO has refused to do.
