Southwest Airlines held a conference call with investors Thursday to lay out a plan for long-term profitability. The Dallas-based airline posted a profit in the second quarter but a $231 million loss in the first quarter, and a $219 million loss in the fourth quarter of 2023.
During the conference call, Southwest told shareholders revenue in the third quarter could increase by 3% from the same time last year. A previous forecast predicted a 2% drop in revenue.
The airline said it would start offering assigned seating and extra legroom in 2026. Chief Executive Bob Jordan said Southwest is also renewing its fleet and will introduce more international and overnight flights.
"We refuse to let anything distract us from running a safe and reliable operation," he said.
Earlier this week, Elliott Investment Management, said it would seek changes among Southwest's board of directors, saying the company was choosing a "go-it-alone path" to return to profitability.
"This path has featured a chaotic series of defensive actions, including a 'poison pill,' a hastily recruited new director, a half-baked announcement of changes to the Company's product, and the sudden declaration that nearly half of the Board intends to resign in November," the company wrote in a press release.
Elliott said "a failed management team has delivered years of deteriorating performance."
Jordan said the ideas introduced Thursday would be introduced over three years and were produced over a "long period of time."
"For Elliott to call that plan rushed and haphazard, in my opinion, is inane," he said.
Southwest said its plan would deliver $500 million in cost-cutting over the next three years, including more efficient scheduling, improved "corporate efficiency" and "capitalizing on supply chain opportunities."
The airline also said it will minimize hiring and reduce its workforce through attrition.
Earlier this week, Southwest announced it would cut service in Atlanta next year and could cut 300 pilots and flight attendants in the city. Throughout its network, Southwest said business travel has dropped 8% since 2018, but leisure travel has increased 7%.
Southwest does say it plans no changes to its policy allowing two free checked bags. During the presentation, Jordan also said Southwest has a "unique set of strategic advantages," including free checked bags, a point-to-point system instead of hubs, and using a single type of aircraft.
The airline also plans to increase overnight or "red-eye" flights. Southwest says the change will "increase asset utilization and reduce overstaffing costs." The airline expects 5-33 red-eye flights with 18 planes next year increasing to 50 flights on 28 planes in 2027. Southwest says the change will be especially beneficial in routes to Hawaii.
Southwest has labor agreements in place with all its unions through the third quarter of 2027. Chief Financial Officer Tammy Romo said those deals will keep labor costs predictable.
"This builds on the investments we've made in operational quality which are already paying off with strong operational performance this year," she said.
Southwest said it also has firm orders or options to buy 694 Boeing 737s through 2031.
"It lowers aircraft operating costs and increases operational reliability, so it is a win-win across the board," Romo says.
A half hour before closing Thursday, Southwest Airlines stock was up 5.46% for the day and trading at $29.94.
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