Southwest Raises Revenue Outlook, Announces More Changes Amid Activist Pressure
Skift Take
Key Points
- Southwest Airlines raised its revenue guidance for the third quarter, expecting a 2-3% increase in revenue per available seat mile.
- The airline plans to introduce premium seating and red-eye flights to drive up profits, with changes expected to generate around $4 billion in earnings by 2027.
- Southwest will cut service in Atlanta and partner with Icelandair in 2025, amidst pressure from activist investor Elliott Investment Management for more changes.
Summary
Southwest Airlines has raised its revenue outlook for the third quarter, forecasting a 2-3% increase in revenue per available seat mile. The airline plans to introduce premium seating and red-eye flights, aiming to generate around $4 billion in earnings by 2027. Additionally, Southwest will cut service in Atlanta and partner with Icelandair in 2025, while facing pressure from activist investor Elliott Investment Management for further changes.
Southwest Airlines raised its revenue guidance for the third quarter as it plans to announce more changes during its investor day on Thursday.
The carrier expects its revenue per available seat mile to increase between 2% and 3%, up from previous estimates. Southwest attributed part of the increase to a bump in bookings following the CrowdStrike outage and “improving industry demand trends.”
To drive up profits, Southwest has so far said it would introduce premium seating and red-eye flights. The airline plans to start retrofitting its cabins with premium seats next year. The seating changes are expected to rake in an additional $1.5 billion in revenue.
However, it doubled down on its free two-checked bags policy, saying that it generated more market share gains compared to revenue earned from bag fees.
Southwest expects these changes to generate around $4 billion in earnings before interest and taxes by 2027.
On Wednesday, Southwest announced it would cut service in Atlanta, impacting around 300 pilot and flight attendant positions. The carrier said in an internal memo that its current flying levels in Atlanta were not profitable.
Another major change for Southwest is global airline partnerships. Icelandair will be Southwest’s first partner, expecting a 2025 launch at Baltimore-Washington International Airport.
These changes come as Southwest continues to face pressure from activist investor Elliott Investment Management, a hedge fund that is pushing for CEO Bob Jordan to step down. Elliott said on Tuesday that it planned to call for a special meeting as early as next week to force more changes at Southwest.
Southwest Airlines CEO Bob Jordan at Skift Aviation Forum 2023
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Photo Credit: Southwest Airlines check-in desks. Flickr / Evan Didier
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