Following lackluster earnings, Southwest is ready to make drastic changes to get back on course.
Southwest CEO Bob Jordan said in the company’s first-quarter earnings call Thursday that in August it would stop service at airports in Cozumel, Mexico; Bellingham, Wash.; Syracuse, N.Y.; and Houston, Tex. It also said it would reduce flights at major hubs such as Hartsfield-Jackson Atlanta International Airport and Chicago O’Hare International Airport.
“While it’s never our desire to exit a city or shrink service to a market, we are committed to our financial performance goals, and network and capacity actions will continue as a lever to improve overall financial performance,” Jordan said on the call.
Southwest shares closed down 7% on Thursday after the carrier reported a $231 million loss, deepening from a $159 million loss during the same period a year prior. The stock dipped another 0.8% on Friday to end at $27.03.
The carrier also said its ambitious growth plans were on hold because of Boeing’s delivery delays and now expects to receive 20 planes this year, instead of the 46 it expected in March.
In addition to retreating from some airports, Southwest said it has frozen hiring, with the exception of a few important positions, and would offer some of its employees unpaid leave later this year to cut back on costs. The carrier said it expects its workforce to shrink by about 2,000 employees by the end of the year when compared to 2023.
Not only is the company cutting costs, it is also exploring new revenue streams, even if that means changing some of its long-held practices. This includes re-evaluating its open-seating plan, where customers can pick whichever seats they like as they board.
The carrier’s competitors have steadily moved to expand tiered seating beyond just coach and first class, resulting in major revenue inflows. Southwest hasn’t benefited from this trend because of its dedication to having a single cabin.
But the company is now assessing whether to make changes to better accommodate its customers’ preferences without straying from its brand ideals, said Jordan.
“[E]arly indications, both for our customers and for Southwest, look pretty darn interesting. So I’ll just leave it there and more to follow,” he said.
Still, some things, like a curtain between first class and coach, wouldn’t feel right, added Southwest Chief Commercial Officer Ryan Green. Bag fees, which are common on other airlines, are not on the table either.
“We will stay true no matter what we do to the brand and who we are and how we approach customers,” Green said.