New York
CNN
—
Southwest Airlines is shifting to assigned seats for the first time in its history, a change that will allow the low-fare carrier to charge a premium for some of the seats on its planes.
The airline will also start offering overnight “red-eye” flights for the first time, which it said will improve the efficiency by increasing the use of its aircraft.
Southwest said customers were clamoring for these changes – when people switch to a competitor from Southwest, the company said the No. 1 reason the unhappy passengers cite is open seating. But the change will also help the company charge some passengers more for their tickets.
“The research is clear and indicates that 80% of Southwest customers, and 86% of potential customers, prefer an assigned seat,” said the airline in a statement. “By moving to an assigned seating model, Southwest expects to broaden its appeal and attract more flying from its current and future customers.”
Southwest did not give details about when the changes will go into effect, but it said it would be discussed further in September.
The airline had announced in April that it was looking at a change in its seating policy that has been in effect for its entire 50 year history. Southwest is under pressure from activist investors who have been pushing for changes in management and growth in profitability.
Southwest has long been known as a low-cost, low-fare carrier, but it has been facing competition from the three other major carriers, American, United and Delta, which get much of their revenue from charging more for premium seating. It also faces growing rivalries on the other end of the spectrum: ultra-low cost carriers, such as Spirit and Frontier, which offer bargain-priced seats for which customers have to pay extra for just about anything including carry on bags.
Southwest doesn’t charge for carry on bags and has long allowed passengers to check two bags for free. The airline also doesn’t charge customers to change flights.
The company made no mention in its statement about whether it will change its baggage or change fee policy. The premium seats, which will offer more legroom, will not be available until 2025 as it will require reconfiguring its planes.
Southwest used to be the most profitable US airline. But that is no longer the case.
Thursday, it reported a 51% drop in profit to $370 million, despite reporting record revenue for the quarter.
Although Southwest still has the healthiest credit rating of any US airline, it has been struggling with a number of issues in recent years – some as a result of its own mismanagement, but some because of outside factors and changing industry dynamics.
The airline went 47 consecutive years without reporting an annual loss – until 2020, when the pandemic nearly halted all demand for air travel.
Southwest’s fleet is made up entirely of Boeing 737 jets. That had reduced its operating costs, because it allowed its pilots to fly any of its planes, giving it a flexibility and efficiency not available to its larger rivals. But it also made it most susceptible to Boeing’s substantial problems in recent years – both a 20-month grounding of the 737 Max in 2019 and 2020 following two fatal crashes, and a slowdown in production this year due to concerns about the quality and safety of its planes.
But its low-cost efforts also hurt Southwest at times, most notably in December 2022, when its suffered a catastrophic service meltdown that caused it to cancel about 17,000 flights, or nearly half of its schedule, during the busy holiday travel period. While other airlines recovered quickly from a winter storm that month, Southwest’s computer technology, denounced as “antiquated” by its unions, made it difficult for it to schedule its pilots and flight attendants and resume normal operations.
That meltdown cost Southwest around $1 billion, including a $140 million fine. But it underwent a massive update to its technology since then, and notably, Southwest managed to recover quickly from the global tech outage last week. This time, it was rival Delta that took days to recover.
Shares of Southwest (LUV) were down 2% in premarket trading on its news.
This story has been updated with additional context and developments.
