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Southwest eliminates open seating, ending decades-old practice
Southwest Airlines (I LOVE) announced Thursday it will do away with open seating in a radical departure from its decades-old practice. Instead, it will begin assigning seats and offering premium seats with extra legroom.
Shares of the national carrier rose more than 5.5% on Thursday.
Southwest CEO Bob Jordan said, “Our implementation of assigned and premium seating is part of an ongoing, comprehensive upgrade of the customer experience, which research shows customers overwhelmingly prefer.”
The low-cost carrier has a tradition of open seating for more than 50 years. Customers taking longer flights prefer assigned seats, according to Southwest.
Airlines can also charge more for assigned and premium seats, allowing them to increase profits.
But CFRA equity analyst Zachary Warring didn’t seem convinced that the airline’s declining margins would be helped by the seat shift.
“The company announced the end of its open seating policy in an attempt to address its margin problem, but we believe this may upset its customer base,” Warring wrote Thursday morning.
“We remain neutral on the stock as we believe the US consumer is showing signs of recovery, while capacity remains elevated and LUV’s multiple remains elevated,” he added.
Changes are coming amidst the pressure activist investor Elliott Management, which earlier this month warned of a proxy fight as it seeks a “new and truly independent” board of directors.
A traveler walks past the Southwest Airlines ticket counter area at Los Angeles International Airport in Los Angeles, April 18, 2023. (AP Photo/Jae C. Hong, File) (ASSOCIATED PRESS)
Southwest also announced it will launch overnight flights, with the first routes starting on Valentine’s Day in 2025.
The carrier also reported quarterly results on Thursday. Adjusted earnings per share came in at 58 cents, compared with Wall Street estimates of 51 cents. Revenue came in at $7.35 billion, compared with analysts’ expectations of $7.33 billion.
Increased competition and higher labor costs have weighed on domestic carriers’ profits. Airlines have been forced to cut fares to compete amid rising capacity.
American Airlines (AAL) cut its forecast on Thursday, sending the airline’s shares down 5%.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.