Southwest’s Catch-up Game: What’s After Elliott Settlement?

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Southwest has struggled in recent months, but CEO Bob Jordan says he has a plan. The Southwest experience may not look all that different from other airlines.

Elizabeth Casolo

Elliott Investment Management tried to leverage its activist stake in Southwest Airlines to push out CEO Bob Jordan — but Jordan is still in charge. Now he explains how Southwest plans to keep pace with rival airlines.

On Tuesday Skift Aviation ForumJordan said he thinks “that chapter is closed” with Elliott.

“You get feedback from your shareholders, not just Elliott,” Jordan said. “And the feedback was clear. We had to continue with the renewal of our management.”

Five of Elliott’s directorial choices joined Southwest’s board and former chairman Gary Kelly left.

Jordan said changes have been underway at Southwest for a while, but Elliott has accelerated the process. “Southwest Airlines will return to industry-leading profitability,” Jordan said.

Changes are coming

In addition to taking customer preferences into account, the company ran simulations to evaluate how certain adjustments would affect boarding times.

“This is by far the deepest investigation we have ever done,” Jordan said.

Assigned seating and extra legroom are a big selling point for passengers. Jordan said 86% of customers who don’t choose Southwest do so because of these concerns.

These seat adjustments, airline partnerships and red-eye flights may be standard with other airlines, but they are all part of Southwest’s agenda to keep up.

“A lot of customers like red eyes, but what it does for you on the efficiency side is it makes aircraft utilization even higher and makes our people more efficient,” Jordan said.

Another change: going paperless in the cockpit and cabin, a transition airlines have made over the past decade.

“If we had an offline diversion to an airport that Southwest Airlines doesn’t serve… because we were operating on paper, you had to find someone with a printer to reprint the new shipping and shipping release papers, the fuel paper,” Jordan said. “And today we go to an offline airport, you press a button on the iPad and off you go.”

Another controversial choice: withdraw from Atlanta.

While the company still offers more than 50 flights per day on the the world’s busiest passenger airportit shifts its focus to other cities. Trying to identify rising demand, Jordan points to Austin and Nashville as growth areas.

“Southwest Airlines is going to win, but you have to pick your battles,” Jordan said.

Where the southwest remains stable

With inflation and labor costs rising, Jordan thinks Southwest is still in a good place.

“Southwest Airlines has put all of their employment contracts on hold,” he said.

Other airlines have adopted a Southwest strategy: no change fees. But Jordan sees no threat when it comes to company policy.

“We have always had the best customer-centric, customer-friendly policies in the industry,” Jordan said. Among the policies he mentioned: Southwest credits and Rapid Rewards points that don’t expire and no checked bag fees.

“We have been, without a doubt, the champion for the consumer and the customer from the beginning,” Jordan said.

What else is in Jordan’s Playbook

• Joining forces: Jordan teased the possibility of Southwest joining IATA, while there is no official plan yet.
• Dealing with bad press: “I haven’t read any of it,” Jordan said, reflecting on media coverage of Elliott’s activism.