For the decades that followed its launch out of San Antonio in 1966, Southwest Airlines (LUV) became known for a number of things that are not at all common on other airlines.
The main one, a seating policy in which passengers board according to check-in time and fare class and then choose from any available seat, became the victim of cost-cutting measures that chief executive Bob Jordan said are necessary amid a number of unprofitable quarters and a revenue drop of 46% to $367 million in the second quarter.
Related: Southwest Airlines finally makes the seating change many feared
Over the month that followed, investment company Elliott Investment Management has been buying up Southwest shares but also amplifying its efforts to oust Jordan and board chairman Gary Kelly over what they claim is “poor execution and leadership’s stubborn unwillingness to evolve the company’s strategy.”
Many people think Southwest will soon back away from ‘bags fly free’
It has now acquired enough shares — 10% — to call for a special shareholder meeting and a potential vote on Jordan and Kelly’s removal.
More Travel:
A new travel term is taking over the internet (and reaching airlines and hotels)The 10 best airline stocks to buy nowAirlines see a new kind of traveler at the front of the plane
Between Elliott’s push for drastic cost-cutting, the recent changes to the seating policy and the fact that Southwest recently sent out a survey asking some members of its loyalty program about their “bags fly free” rule led many to speculate that the latter would become the next austerity victim. The policy, which allows travelers of any fare class to check two bags for free, is by far the most generous in the industry.
Southwest has denied the suggestion that it would make immediate changes to its bag policy and said that it was merely looking to see what customers “value.”
Related: Get the best cruise tips, deals, and news on the ships from our expert cruiser
Southwest responds: ‘No work currently underway to change our policy’
“There’s no work currently underway to change our industry-leading two bags fly free policy, but it’s important for us to know what our customers value most,” Southwest said in a statement to news outlets. “We’ll continue our efforts to track stakeholder sentiment on many aspects of our business model to ensure we remain competitive and current on customer preferences.”
In a past earnings call, Jordan said that many “people choose Southwest Airlines because we don’t have bag fees” while Southwest also said it will “provide more details on its comprehensive plan to deliver transformational commercial initiatives, improved operational efficiency and capital allocation discipline during its Investor Day in late September.”
The sent-out survey, however, asked “hypothetical” questions that led many to doubt the veracity of the denials. One asked respondents to weigh in on how they would feel if the cheapest Wanna Get Away fare included only a personal item and a carry-on bag while the Wanna Get Away Plus fare included a free checked bag. The higher fare classes would continue to get two free checked bags.
Weight brought by everything from the design of the aircraft (Switzerland’s flagship carrier Swiss is currently redesigning some of its planes after underestimating how heavy the first-class seats would be) and baggage brought onboard are a key financial consideration for airlines given that it affects both fuel consumption and how many fare-paying customers can be brought onboard.
