Southwest Airlines will begin offering assigned seats, abandoning its no-fee policy that has been a hallmark of the airline for more than half a century.
The airline announced major changes to its business model on Thursday, along with the introduction of new first-class options and a red-eye flight program. Although Southwest said earlier this year it was reconsidering its seating policy, it now faces increased pressure from activist investor Elliott Management to improve its underperforming business.
The moves represent a shift in strategy for the airline, which has been steadfast in keeping seats open while other airlines have made money by charging extra for more desirable seats. That unrealized opportunity was a key tenet of Elliott’s campaign — Southwest refused to modernize its operations to appeal to today’s travelers.
The introduction of premium seating could open the door for the airline – which has long attracted primarily leisure travelers – to potentially offer business and first class in the future.
Southwest Airlines still won’t charge for checked bags. The “free baggage” policy has been a focus of Southwest’s promotions and advertising, and some analysts have speculated that charging for bags could cost the airline’s passengers. It’s the only U.S. airline that doesn’t charge a two-piece checked fee.
Southwest will begin offering assigned seats and premium seats with more legroom next year. The flight will begin operating night cross-country routes on February 13. Las Vegas to Orlando; Los Angeles to Nashville.
Southwest said details on which seats will be charged and what additional charges are still being decided. All seats will be assigned, but there will not be separate cabins for premium services. The airline has explored various seat options in the past but has always refused to move to assigned seats, saying passengers would not support such a move.
Recent changes
While Southwest has long adhered to some of its core policies, it hasn’t been entirely resistant to change. It began flying to nearby international destinations and recently added flights to Hawaii. The airline has previously revamped its check-in system, offered early boarding options for an additional fee and developed corporate booking tools to win over more business travelers.
Southwest said in April it had begun evaluating premium products and other changes long before Elliott disclosed a $1.9 billion stake last month. But as late as Thursday, the airline said it would not reveal any details ahead of an investor meeting scheduled for September.
Elliott wants to oust Chief Executive Bob Jordan and Chairman Gary Kelly because of their poor execution and “stubborn unwillingness to evolve the company’s strategy.” The activist said they were “not up to the task of modernizing Southwest Airlines.”
Earlier this month, Southwest appointed a veteran airline industry executive to its board of directors to help address other concerns raised by Elliott. The airline has also adopted a “poison pill” shareholder rights plan to prevent activists from taking larger stakes.
