Bags will continue to fly free on Southwest Airlines, and the company will continue to operate only Boeing 737 family planes. Those are two keystones of the airline’s operations and are two of the only things not expected to change over the next 18 months as the company embarks on its “Southwest. Even Better.” transitional plan.
We’re now ushering in a new era at Southwest, moving swiftly and deliberately to transform the Company by elevating the Customer Experience, improving financial performance, and driving sustainable Shareholder value. – Bob Jordan, President, Chief Executive Officer, and Vice Chairman of the Board
Southwest’s Premium and Assigned Seating to Fly in 2026
Southwest tipped earlier this year that it would switch to assigned seating. The company has now released some details on that plan. The Extra Legroom (“ELR”) section will cover roughly a third of the seats on board, without removing any seats from the carriers 737-800 or MAX 8 planes.
The MAX 7 (whenever it gets delivered) will drop two seats from its previously expected configuration. The 737-700 sees one row removed and a more generous 36″ ELR layout, compared to 34″ on the other planes.
The company notes in its investor guidance that the increased revenue it expects to recognize from this move is comparable to what it could achieve with a blocked middle seat option. Given the recent shift from Frontier to offer that, and Spirit’s move to a more traditional first class product from Big Front Seat, Southwest’s play seems very incremental, not a step change for the company.
Read More: Southwest shows off customizations for new Recaro seats
The company also confirmed that its lowest Wanna Get Away fare family will not include advance seat assignments; passengers who want to confirm their seat in advance will need to buy the WGA+ option. This was positioned as not taking anything away from the exist product. As Chief Operating Officer Andrew Watterson explains, “We have a driver for buy-ups that is substantial and is not about scaring people away.”
Ultimately, even with the loss of EarlyBird boarding revenue and the few seats being removed, Southwest anticipates a $1.5bn annual uplift from the shift. But not until 2026.
Southwest plans to convert 50-100 planes per month, starting in Q1 2025. The new product will go on sale mid-year but not officially fly until 2026. That allows the company to have the fleet fully ready for the new layout before taking any customers’ money. But it also means another full year of missing out on that potential revenue boost.
From a boarding perspective Southwest intends to keep the “unique and popular” position numbers and stanchions in the gate areas, just shifting how passengers are assigned to which numbers/groups.
Bags *Still* Fly Free on Southwest
While there has been a push from outsiders for Southwest to unbundle everything on offer, the company is holding fast on its “Bags Fly Free” play. It is, like everything else, a numbers game, and Southwest says the numbers say losing that policy would lose it money.
Charging for bags would bring in $1.5 billion annually, according to the company’s analysis. But it would drive away $1.8 billion through loss of market share. The negative impact to the brand would also factor into that expected loss.
Loyalty Crosses the Atlantic
Recognizing the value of the Rapid Rewards loyalty program, and the shortcomings the company has in its route network for redemptions, Southwest is pushing forward with partnerships. Icelandair will be the company’s first global partner, allowing connectivity to Europe. That relationship will cover both revenue and reward bookings, with connectivity via BWI as the first gateway. The carriers anticipate additional gateways being added going forward. Denver is an obvious candidate, at least for Icelandair’s seasonal service.
Southwest also “intends to add at least one additional partner carrier next year.”
Also in the loyalty space, Southwest announced that A-List Plus members will have free access to extra legroom seats at booking. A-List members will have free access at 48 hours from departure.
Making the Fleet Work, Despite Boeing Delays
Finally, Southwest has a plan to “grow” its fleet by an effective 34 planes in 2025, despite Boeing’s inability to come anywhere close to its contractual obligations.
Redeye flying, which launches in February, will contribute the equivalent of 18 new planes to the fleet by the end of the year. That flying is also expected to shift the value proposition, particularly in the Hawaii operations.
The equivalent of another 16 planes will be “added” to the fleet through efforts to reduce turn times. This is a laudable goal, but at some point the fact that the planes simply carry more people now than when quick turns were the norm. This will be a challenging goal to deliver on.
Despite ever-present rumors, Southwest shows no indication that adding another aircraft manufacturer to its operations is a viable consideration.
It is unlikely these changes will fully sate Elliott Investment Management’s desire for significant structural changes within Southwest’s operations. Elliott has indicated it intends to call a special meeting of shareholders in an effort to more broadly change the company’s plans. That parallel storyline adds color to everything around Southwest today.
The full investor day presentation slide deck is available here.
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You completely missed the main news, the one that affects the most people, which is “one less vital inch of legroom for regular economy class seating.”
One more notch in the crappitization of airline travel.