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Key Takeaways
- Southwest Airlines is abandoning its longtime policy of open seating, announcing plans Thursday “to assign seats and offer premium seating options” amid a push to “increase revenue opportunities.”
- The airline also said it will start operating overnight flights starting in February 2025.
- Southwest has been under pressure in recent months from activist investors to focus on revenue-generating efforts.
Southwest Airlines (LUV) is abandoning its longtime policy of open seating, announcing plans Thursday “to assign seats and offer premium seating options to meet evolving Customer preferences and increase revenue opportunities.”
The airline has been under pressure from activist investors like Elliott Investment Management, which amassed a large stake in the company last month and has pressed Southwest to focus more on revenue-generating policies.
Southwest To Introduce Assigned Seating; Overnight Flights Coming in 2025
“Although our unique open seating model has been a part of Southwest Airlines since our inception, our thoughtful and extensive research makes it clear this is the right choice—at the right time—for our Customers, our People, and our Shareholders,” Southwest Chief Executive Officer (CEO) Bob Jordan said.
The company said that its surveys have shown that 80% of Southwest customers would prefer an assigned seat, and importantly, 86% of potential customers said the same, indicating the move could broaden Southwest’s customer base. Southwest also said the open seating policy was the most frequently cited reason by customers who decided to stop flying Southwest and choose a competitor instead.
The airline is also shifting to become operational for 24 hours a day, and said it plans to start selling tickets for overnight flights, beginning in February 2025 with a limited number of initial routes.
Southwest has been fending off pressure from Elliott to make changes at the executive level, recently adopting a “poison pill” plan to prevent the fund from acquiring a larger stake. Elliott has criticized the company’s “stubborn unwillingness” to evolve and keep pace with other large airlines.
Southwest shares rose 4% to $27.69 as of about 11:15 a.m. Thursday, as markets reacted to Thursday’s announcement along with its second-quarter earnings report, which saw the carrier beat expectations but warn of “cost pressures for the remainder of the year.”