Southwest Airlines plans to abandon its 50-plus-year tradition and start assigning seats and selling premium seats to customers who want more legroom.
The airline said Thursday it is studying seat options and making the changes because of changing passenger preferences. The changes could also generate revenue and improve financial performance.
Southwest announced the move the same day it and American Airlines reported sharp drops in second-quarter profits despite higher revenue.
Airlines are facing higher costs and reduced pricing power, particularly on flights within the United States, as the industry adds flights faster than travel demand grows.
Dallas-based Southwest said its second-quarter profit fell 46% from a year earlier to $367 million, as higher labor, fuel and other expenses outpaced revenue growth. The results were in line with Wall Street expectations.
American Airlines also reported a 46% drop in profit to $717 million and said it would break even in the third quarter, well below Wall Street expectations for the July-September period.
“American Airlines has not met our initial expectations” because of a since-abandoned sales strategy and an oversupply of domestic flights, CEO Robert Isom said. He added that the airline is responding with a strategy that increases profits and “makes it easy for customers to do business with American Airlines.”
Since its inception, Southwest Airlines has used an open-seat model: Passengers line up to board, then choose their own seat once they’re on the plane. But preferences have “evolved,” according to the airline: As more travelers take longer flights, they want assigned seats.
The airline also said it would offer night flights for the first time.
Southwest Airlines announced its first overnight flights will land on February 14, 2025, in nonstop markets including Las Vegas to Baltimore and Orlando, Los Angeles to Baltimore and Nashville, and Phoenix to Baltimore. It plans to phase in additional overnight flights over time.
The seat policy change comes as Southwest is under pressure from Elliott Investment Management. The hedge fund believes the airline is lagging behind its competitors in financial performance and has failed to adapt to the times. It wants to replace CEO Robert Jordan and Chairman Gary Kelly.
Shares of all major airlines fell before the open Thursday. Southwest Airlines Co. fell 6% and American Airlines Group Inc. lost 7%. Delta, JetBlue and United shed more than 1%.
