Southwest Airlines is under fire from an activist investor who’s targeting management and a few … [+]
Southwest Airlines has all the time been different from the opposite major U.S. airlines. It is thought for its customer-friendly policies equivalent to free checked baggage and free seat selection. The airline is now under pressure to alter its unique approach. Elliott Investment Management, which has built an almost $2 billion stake within the airline, is calls for a comprehensive overhaul which could significantly impact the shopper experience.
One of Notable changes Elliott suggests the possible elimination of Southwest’s popular “baggage flies free” policy. The activist investor apparently sees this popular amenity as a missed opportunity to generate additional revenue, citing other airlines’ lucrative baggage fees.
Southwest occasionally advertises its free baggage policy to spotlight its differences from other airlines.
If Southwest were to introduce fees for checked baggage, it will be a big change in strategy for the airline and will alienate customers who’ve previously expected this profit.
Are there any upcoming changes to seating?
In addition to potential changes to baggage policies, Elliott can be targeting other service features that set Southwest other than other carriers. The investor is unhappy with the airline’s open seating policy and lack of premium and basic economy options.
While Southwest’s approach hasn’t resonated with all passengers, it has helped keep costs down and create a more egalitarian atmosphere. The introduction of assigned seating and stratified classes could make Southwest more just like its competitors and further erode its unique brand identity.
Comprehensive changes within the management team
The proposed changes transcend customer-focused policies. Elliott can be pushing for brand new leadership, calling for the alternative of CEO Bob Jordan with an outdoor candidate and a restructuring of the board. This leadership change could lead on to a broader change in strategy and priorities.
One change Southwest passengers would little question welcome can be an overhaul of the corporate’s creaking IT systems. A system crash in December 2022 left 2 million passengers stranded.
Which stakeholders are most significant?
While Elliott argues that these and other proposed changes are essential to enhance Southwest’s financial performance, he also seeks to prove that customers and employees may also profit.
The airline’s customers may disagree. Southwest’s loyal following is predicated on its unique approach that emphasizes simplicity, affordability and a friendly atmosphere.
At their core, the changes outlined in Elliott’s proposal will aim to generate more revenue for clients as a way to higher reward shareholders.
Whether or not Elliott pushes through the management changes he seeks, Southwest must strike a balance between improving shareholder returns and maintaining the shopper experience that has made the corporate so unique. The consequence of this battle amongst shareholders could determine whether Southwest retains its unique identity. Turning itself right into a clone of United, American and Delta may very well be a fatal mistake.
