Summary Activist investor Elliott criticizes Southwest Airlines' new initiatives and wants leadership changes. In a Fortune op-ed, former United CEO advised Southwest to stay on course with smart transformation. Southwest Airlines changed boarding to assigned seating due to customer demand.
Elliott Investment Management, a private equity firm and activist investor, has criticized Southwest Airlines executives after the airline unveiled new revenue-boosting initiatives. These initiatives include ending its long-standing open seating policy, introducing segmentation with premium seating options, and starting 24-hour operations with overnight flights. In a Fortune op-ed, former United Airlines CEO Oscar Munoz argued that Elliott's strategy for Southwest Airlines might not be entirely ideal.
He criticized the firm's focus on leadership changes and short-term financial gains, suggesting these tactics may need to align better with the airline's long-term growth and stability. Advising to stick with its new course The aviation industry faces several challenges, including staff shortages due to COVID-19, fluctuating fuel prices, IT system outages, airline employee strikes, shifting passenger demands, and supply chain bottlenecks. According to Munoz, the industry challenges have driven low-cost airlines like Spirit Airlines and JetBlue Airways to introduce new business initiatives, such as segmentation.
Similarly, Southwest Airlines is making these changes to address customer demands. He suggests that being open to change can lead to long-term success. However, when investors work with leadership, they can help drive positive improvements.
However, collaboration doesn't appear to be happening here. The private equity firm has criticized Southwest's management for delaying necessary changes and is pushing for a leadership overhaul. Elliott stated that these changes are "more than a decade late" and came after the airline's share price dropped by 50% over the past three years.
Munoz said, "my advice to Southwest and its shareholders is to stay the new course, listening to customers and embracing smart transformation." Southwest's new boarding policy Known for its open-seating model, Southwest has made a significant change. The airline will now assign passengers seats, aligning them with conventional airlines.
The airline says this change is a reaction to consumer demand. Southwest's open-seating policy has been a defining feature for over five decades. In this model, passengers received a boarding group (A, B, or C) and a position number (1-60) based on their check-in time.
Passengers then lined up in numerical order and chose any available seat once onboard. According to the carrier, about 80% of customers prefer assigned seating, especially for longer flights. This prompted the budget airline to rethink its boarding strategy.
When asked for specifics on the new seating arrangements, a Southwest spokesperson told Simple Flying last month: "Nothing that specific from us right now. As our release indicates, more to come at Investor Day in September." Southwest's move to assigned seating sparks mixed reactions.
Loyalists voice concerns, while many welcome less check-in stress and added comfort..
