A Southwest Airlines plane takes off from Hollywood Burbank Airport on July 25, 2024 in Burbank, California.
Mario Tama | Getty Images
Southwest Airlines has warned employees that it will have to make “tough decisions” in the future to boost profits, as the airline faces pressure from activist Elliott Investment Management, which has sought leadership changes at the company.
Over the summer, Southwest announced a series of major changes to its 50-year-old business model to boost revenue. It plans to replace empty seats with assigned seats, offer seats with more legroom that command higher fares, and begin offering late-night flights.
It has also started allowing its flights to appear on Google Flights and Kayak and has changed its advertising to target younger consumers, Chief Operating Officer Andrew Watterson said in a video message to staff last week.
“Now, all of that is not enough. We also have to change our chain,” Watterson said in the video, a transcript of which was seen by CNBC.
“We have to make a couple of tough decisions. It's not about closing stations, it's about continuing to move the network forward to help us get back to profitability,” Watterson said. “So I apologize in advance if this affects you as an individual.”
The airline has no plans to announce any layoffs, but may reduce its presence in certain cities and staff may move elsewhere, according to a person familiar with the matter. The airline is trying to cut costs and focus on profitable flights, the company said.
Other operators such as JetBlue have cut routes this year to deploy planes on higher-revenue flights.
Southwest is set to provide more details about its initiatives and route changes at an investor day Thursday at its Dallas headquarters.
Elliott has pushed for a leadership change at the airline and has criticized Southwest management for not doing enough to improve the company's results. Earlier this month, Executive Chairman and former CEO Gary Kelly said he would step down after the airline's shareholder meeting next year.
Southwest did not immediately comment on the staff's message. The video was previously reported by industry blog View from the Wing.
