Southwest Airlines is ending its long-standing open seating policy, marking the end of a tradition that has been in place for over 50 years. CEO Bob Jordan explained, “The shift to assigned and premium seating is part of our ongoing efforts to enhance the Customer Experience, driven by research indicating strong customer preference for these changes.”
While open seating was a hallmark of Southwest’s service, the airline found that customers on longer flights preferred assigned seats. Additionally, assigned and premium seating options allow airlines to increase revenue.
Despite this move, CFRA equity analyst Zachary Warring expressed skepticism about the impact on Southwest’s margins. “The company’s decision to abandon its open seating policy might not resolve its margin issues and could potentially alienate its customer base,” Warring noted. He maintained a neutral stance on Southwest’s shares, citing concerns about the U.S. consumer’s weakening financial condition and elevated capacity.
The decision also comes amid pressure from activist investor Elliott Management, which has pushed for a “new, truly independent” board of directors and hinted at a potential proxy fight.
In addition to the seating policy change, Southwest announced it will begin offering overnight redeye flights starting on Valentine’s Day 2025.
The airline also reported its quarterly results on Thursday, showing adjusted earnings per share of $0.58, surpassing Wall Street’s estimate of $0.51. Revenue reached $7.35 billion, slightly above the expected $7.33 billion. Increased competition and higher labor costs have pressured profits, leading airlines to lower fares to stay competitive. American Airlines (AAL) reduced its forecast on Thursday, causing its stock to drop by 5%.
