(Bloomberg) — Southwest Airlines Co. warned employees it will announce some tough decisions in the coming days as part of a plan to restore profits and help fend off changes demanded by activist Elliott Investment Management.
The airline’s already announced moves — such as abandoning a 50-year history of not assigning seats, offering a premium product and starting round-trip overnight flights — aren’t enough to improve its finances to the extent needed. That’s driving plans to bring in more revenue through changes to its route and flight network, Chief Operating Officer Andrew Watterson told employees in a video.
“There are also some tough decisions coming up,” Watterson said in the video, a transcript of which was obtained by Bloomberg News on Saturday. “These are not city closures, but rather larger changes for some cities,” he said in the Sept. 19 video.
“I apologize in advance if this affects you as individuals,” Watterson told employees. He did not offer details about the pending changes. Southwest will release a new flight schedule on Sept. 25 that should include network changes.
The video is part of a regular series of explanatory presentations Watterson sends to workers, Southwest said Saturday.
The airline is scheduled to detail measures it has already disclosed, such as seat assignments, on Sept. 26 and will unveil the new measures at an investor day in Dallas. The stakes are high, as Elliott is seeking to oust CEO Bob Jordan and restructure Southwest’s board with his own candidates.
“We’re trying to get more out of what we already have, but controlling our costs isn’t going to be enough, because we’re not going to do it at the expense of employees or customers,” Watterson said. “So it has to be on the revenue side where we make the effort to balance our profitability and the equation.”
Elliott has said Jordan and Chairman Gary Kelly have refused to adapt the airline’s business model to recognize consumer demands for more premium products. Southwest announced Sept. 10 that Kelly had agreed to step down after the airline’s annual meeting next spring and that six directors will step down after the board’s November meeting. The company will name four new independent directors at that time.
The airline has already changed its advertising to reach younger consumers and added new channels to distribute its fares, such as Google Flights and Kayak, Watterson said. It is trying to fill seats that have been vacated in part by business travelers who are not traveling as frequently as they did before the pandemic.
The video was reported on Saturday by travel blog View From the Wing.
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