Southwest Airlines is ditching open seating on flights
Under pressure to improve profits, Southwest plans big changes for the boarding of its flights as well as fliers who want premium seating.
Southwest Airlines will soon assign seats on flights and sell some with extra legroom, making sweeping changes in a bid to broaden its appeal to passengers and boost revenue.
The plans, announced Thursday, also come as it fends off an activist investor pushing for an overhaul of the airline’s leadership and operating strategy.
Open seating has been a hallmark of Southwest flights since the carrier got its start over 50 years ago. It was part of a business model that produced decades of uninterrupted profits and democratized flying in the process. But Southwest executives said that the company needs to adapt to what today’s customers want.
“This is the right change at the right time," Southwest Chief Executive Bob Jordan said in an interview.
It isn’t clear when flying with assigned seats and premium rows will start, but Southwest said bookings for them are expected to begin next year. The exact timing of the changes depend on the airline gaining regulatory approval and retrofitting its planes.
It expects to share more details at an investor presentation in late September. Southwest also plans to operate red-eye flights for the first time starting next year.
In the crosshairs
The carrier has been facing challenges on a range of fronts. Its profit margins have lagged behind many rivals and pulled back from some new cities it entered as part of an ambitious expansion strategy.
Other airlines are also grappling with too many empty seats on U.S. flights and weaker fares, but Southwest doesn’t have the vast international network and high-end offerings that have offset those problems for rivals.
Through Wednesday its share price this year is down about 7.9%, compared with a 14% gain in the S&P 500.
Elliott Investment Management, an influential hedge fund that has amassed a $1.9 billion stake in the company, has criticized the airline for being slow to adapt to modern flying. Elliott wrote in a letter to Southwest’s board that changes it has been contemplating are too little, too late, and that many investors have lost confidence in the airline’s leaders.
Southwest said it started studying potential changes last fall, before Elliott in June disclosed its stake in the airline.
Jordan declined to estimate exactly how much extra revenue the airline’s new initiatives will bring in, but said he expects it to be “significantly north" of the nearly $1 billion Southwest currently generates selling extras like those that allow passengers to board sooner.
New boarding plan
Southwest’s plan eases pressure on fliers to check in precisely 24 hours in advance or to pay extra to get a good spot in queues at airport gates.
Fans of the airline have said they loved open seating. When flights were emptier, they could often land a window or aisle seat. That is happening far less frequently though, as planes are more packed.
The airline said it surveyed thousands of customers to understand what they want and what they would be willing to pay for. It found that 80% favored assigned seats—an overwhelming share that Jordan said took him by surprise. “Our customers really, really, really want it," he said.
And the carrier is betting it can bring in more fliers, including those who wouldn’t have previously considered Southwest. As it makes a bigger push for corporate travelers, it has found road warriors have little interest in playing seating roulette.
Many employees, tired of refereeing preflight seat disputes, want it too. The airline got more internal complaints when it ditched serving peanuts on flights than when it started discussing potential changes a few months ago, executives said.
Extended legroom seats will eventually account for about a third of seats across Southwest’s fleet, but executives say they are not planning on a true first-class cabin.
Ryan Green, the executive charged with leading the commercial transformation, said that since Southwest seats are already among the roomiest in economy cabins, it is possible to cede some space without making the experience uncomfortable for those who don’t pay up. It isn’t clear how much the option will cost passengers.
Selling to skeptics
Currently, Southwest’s boarding procedure involves sorting customers into three groups (A, B or C), assigning them a number, and calling for them to line up in order. Passengers who pay for boarding and check-in upgrades, have elite status or pay for pricier ticket options can improve their position.
To test out different boarding methods, Southwest enlisted employees along with their families to practice getting on and off planes over several days in Houston. The passengers were loaded up with carry-ons and strollers, and some used wheelchairs. They tried different boarding and assigned seating configurations to determine whether assigning seats would slow things down—one reason the airline previously opted not to do it.
The carrier set up cameras to track passengers’ movements. Some testers wore Google Glass devices so the airline could see the experience from their perspective—how they searched out seat numbers and overhead bin space.
Southwest validated its findings with millions of computer simulations, and found that it could make the change without gumming up operations.
Jordan said he knows there may be a small, but vocal group of superfans who are skeptical as their beloved airline transforms.
“I think we will win those folks over," he said.
Write to Alison Sider at alison.sider@wsj.com
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