Key Takeaways
- Southwest Airlines informed employees Wednesday that next year it will reduce its operations in Atlanta, amid pressure from Elliott Investment Management to make changes.
- The airline is also continuing its negotiations with Elliott, which has taken a roughly 11% stake in Southwest and called for significant changes.
- Southwest had said it would provide details on its future plans at its investor day Thursday.
Southwest Airlines (LUV) is set to hold its annual investor day Thursday, and sent a memo to employees notifying them of at least one planned change that could be announced during the event: a reduction in flights and staffing to and from Atlanta starting next year.
The airline’s crew base in Atlanta will remain open, but the staff required to complete the reduced schedule will be reduced by up to 200 flight attendants and 140 pilots, according to a memo first reported by CNBC. The company reportedly told employees it “cannot afford continued losses.”
A Southwest spokesperson told Investopedia that the airline continues “to optimize our network to meet Customer demand, best utilize our fleet, and maximize revenue opportunities,” noting that any impacted employees in Atlanta will have the opportunity to transfer stations before the changes take effect in six months.
Changes Come Amid Activist Pressure Ahead of Investor Day
Southwest has announced other cost-cutting and revenue-generating measures in recent months, as it has faced increasing pressure from activist investor Elliott Investment Management to improve its finances and make changes at the executive level. The airline announced plans in July to introduce assigned seating and red-eye flights, as Southwest looks to generate more revenue with the same number of planes.
Elliott, which recently achieved a roughly 11% ownership of Southwest shares, wrote in a letter to shareholders Tuesday that it believes the company has “chosen a go-it-alone path with the goal of obstructing a leadership change that is urgently needed,” and said it intends to call a special meeting in the coming weeks.
In response, Southwest said it has “made every effort to reach a constructive resolution with Elliott,” and added that shareholders will hear more about the airline’s future plans at Thursday’s investor day.
Southwest shares slipped 2% to $29.10 early Wednesday afternoon and are little changed on the year.