Southwest Airlines is getting rid of open seating

Chris Isidore, CNN

New York (CNN) — Southwest Airlines is shifting to assigned seats for nan first clip successful its history, a alteration that will let nan low-fare bearer to complaint a premium for immoderate of nan seats connected its planes.

The hose will besides commencement offering overnight “red-eye” flights for nan first time, which it said will amended nan ratio by expanding nan usage of its aircraft.

Southwest said customers were clamoring for these changes – erstwhile group move to a competitor from Southwest, nan institution said nan No. 1 logic nan unhappy passengers mention is unfastened seating. But nan alteration will besides thief nan institution complaint immoderate passengers much for their tickets.

“The investigation is clear and indicates that 80% of Southwest customers, and 86% of imaginable customers, for illustration an assigned seat,” said nan hose successful a statement. “By moving to an assigned seating model, Southwest expects to broaden its entreaty and pull much flying from its existent and early customers.”

Southwest did not springiness specifications astir erstwhile nan changes will spell into effect, but it said it would beryllium discussed further successful September.

A tectonic shift

The hose had announced successful April that it was looking astatine a alteration successful its seating argumentation that has been successful effect for its full 50 twelvemonth history. Southwest is nether unit from activistic investors who person been pushing for changes successful guidance and maturation successful profitability.

Southwest has agelong been known arsenic a low-cost, low-fare carrier, but it has been facing title from nan 3 different awesome carriers, American, United and Delta, which get overmuch of their gross from charging much for premium seating. It besides faces increasing rivalries connected nan different extremity of nan spectrum: ultra-low costs carriers, specified arsenic Spirit and Frontier, which connection bargain-priced seats for which customers person to salary other for conscionable astir thing including transportation connected bags.

Southwest doesn’t complaint for transportation connected bags and has agelong allowed passengers to cheque 2 bags for free. The hose besides doesn’t complaint customers to alteration flights.

The institution made nary mention successful its connection astir whether it will alteration its baggage aliases alteration interest policy. The premium seats, which will connection much legroom, will not beryllium disposable until 2025 arsenic it will require reconfiguring its planes.

An ailing business

Southwest utilized to beryllium nan astir profitable US airline. But that is nary longer nan case.

Thursday, it reported a 51% driblet successful adjusted profit to $370 million, contempt reporting grounds gross for nan 4th that was boosted by beardown rider traffic.

But this has been a reliable situation for US airlines to make money. Significant increases successful labour costs and higher substance prices, 2 of nan largest expenses successful nan industry, person eaten into profits. And comparatively debased mean fares person exacerbated nan damage.

Rival American Airlines besides reported its profit fell 44% successful nan 2nd quarter, contempt its ain grounds revenue.

Although Southwest still has nan healthiest in installments standing of immoderate US airline, it has been struggling pinch a number of issues successful caller years – immoderate arsenic a consequence of its ain mismanagement, but immoderate because of extracurricular factors and changing manufacture dynamics.

Shares of Southwest (LUV) were down much than 4% successful premarket trading connected its news.

Ending 5 decades of precedent

The hose went 47 consecutive years without reporting an yearly nonaccomplishment – until 2020, erstwhile nan pandemic astir halted each request for aerial travel.

Southwest’s fleet is made up wholly of Boeing 737 jets. That had reduced its operating costs, because it allowed its pilots to alert immoderate of its planes, giving it a elasticity and ratio not disposable to its larger rivals. But it besides made it astir susceptible to Boeing’s important problems successful caller years – some a 20-month grounding of nan 737 Max successful 2019 and 2020 pursuing 2 fatal crashes, and a slowdown successful accumulation this twelvemonth owed to concerns astir nan value and information of its planes.

But its low-cost efforts besides wounded Southwest astatine times, astir notably successful December 2022, erstwhile its suffered a catastrophic work meltdown that caused it to cancel astir 17,000 flights, aliases astir half of its schedule, during nan engaged vacation recreation period. While different airlines recovered quickly from a wintertime large wind that month, Southwest’s machine technology, denounced arsenic “antiquated” by its unions, made it difficult for it to schedule its pilots and formation attendants and resume normal operations.

Southwest made changes successful its package and operations successful nan aftermath of those work issues. And past week, arsenic galore of nan world’s airlines were forced to cancel 5,000 flights successful a azygous time owed to a flawed package update from cyber information patient CrowdStrike, Southwest was 1 of nan fewer carriers that avoided nan rumor and did not person to cancel flights. This clip it was rival Delta Air Lines that suffered nan work meltdown.

But that December 2022 meltdown costs Southwest astir $1 billion, including a $140 cardinal good from nan Department of Transportation. And it resulted successful a nonaccomplishment successful nan 4th fourth of 2022 arsenic good arsenic nan first 4th of 2023 arsenic passengers were reluctant to book connected hose successful nan contiguous aftermath of nan work problems.

The institution reported losses successful nan 4th fourth of 2023 and first 4th of 2024 arsenic good amid higher labour and substance costs. Losing money successful 4 of six quarters earlier nan astir caller play is simply a stunning and unwanted reversal of fortunes for Southwest. The hose had antecedently posted losses only during nan pandemic, Great Recession and aft nan September 11 violent attacks – moreover while its rivals were flying successful and retired of bankruptcy. It besides brought unwanted attraction from activists investors astatine Elliott Investment Management, which announced successful June it had taken a $1.9 cardinal liking successful nan hose and called for guidance changes.

Incidents raise information concerns

Southwest has besides gotten unwanted attraction from nan Federal Aviation Administration, which announced earlier this period it is stepping up oversight of its operations owed to a number of perchance vulnerable incidents involving its planes successful caller months.

In March, a Southwest pitchy veered disconnected people and had a adjacent telephone pinch an aerial postulation power building during an attempted landing astatine New York’s LaGuardia Airport. In April, a level plunged to wrong 400 feet of nan aboveground of nan Pacific Ocean disconnected nan seashore of Hawaii. In June different level came wrong 525 feet of nan crushed complete an Oklahoma municipality erstwhile it was still 9 miles distant from nan Oklahoma City airport. And later that period a level took disconnected connected a closed runway astatine nan airdrome successful Portland Maine which had a repair conveyance connected it that had to title to get retired of its way. Earlier this month, a level sewage wrong 150 feet of nan crushed erstwhile it was still 5 miles distant from nan airdrome successful Tampa, according to information from Flightradar24.

“The FAA has accrued oversight of Southwest Airlines to guarantee it is complying pinch national information regulations,” nan agency said successful a statement.

Southwest said it has formed an soul squad to besides look astatine nan incidents.

“Southwest is moving intimately pinch nan Federal Aviation Administration successful nan reappraisal of caller events,” it said.