Southwest Sees Major Dip in Profits as It Vows to Make ‘Urgent’ Changes

Skift Take

Southwest’s profits decreased by 46% as it looks to make changes to its business model to boost its bottom line.

Meghna Maharishi

Southwest reported a major decline in its profits for the second quarter as it announced that it will roll out premium seating in a bid to boost its declining revenues. 

The carrier had a net income of $367 million for the quarter, around a 46% decrease compared to the same time last year. Its revenues, however, were a record for the quarter at $7.35 billion. 

“We are taking urgent and deliberate steps to mitigate near-term revenue challenges and implement longer-term transformational initiatives that are designed to drive meaningful top and bottom-line growth,” CEO Bob Jordan said in a statement. 

Southwest previously lowered its revenue outlook due to difficulties in keeping up changing consumer preferences. Earlier this morning, Southwest announced that it would launch premium seating, and as a result, do away with its open boarding process. 

The change is one of the most significant in Southwest’s history as it’s always been known for its all-economy cabins and open seating. 

These changes and decline in profits come as Southwest is facing immense activist pressure from Elliott Investment Management, which wants Jordan and Chairman Gary Kelly to resign. The hedge fund has also said that Southwest should consider making major changes to its business model, such as adding premium seating.

Southwest appointed a longtime airline executive to its board of directors and adopted a “poison pill” in the hopes of fending off Elliott from acquiring a bigger stake in the company. Elliott said it was willing to start a proxy fight to gain more voting power. 

Southwest executives will discuss the carrier’s second-quarter earnings in a call with analysts at 12:30 p.m. ET.