The carrier said it intends to greatly reduce its service and staffing from Hartsfield-Jackson Atlanta International Airport under a broad cost-cutting initiative that the Wall Street Journal today said was prompted by activist investor Elliott Investment Management. Over 200 flights per week in and out of Atlanta will be curtailed. The number of flights covered by weekly airline schedule would decrease to 361 from 567. From Atlanta, the airline would decrease the serviced destinations to 21 from 37.
The pressure comes amid declining financial performance by Southwest, which had recently reported losses for the last several quarters. Elliott Investment, which is reportedly said to hold an equity stake of 10% in the company, has been pressing a radical restructuring, which would include a cutting of loss-making operations. Southwest says it will not lay off any employees, but about 340 pilots and flight attendants will be reassigned to other locations around its hubs.
The upper brass at Southwest, headed by CEO Bob Jordan, will be under special focus, particularly considering the call by Elliott for broader restructuring within the airline’s executive ranks. The carrier will likely elaborate further on its plans as part of an investor day it has scheduled; cost cuts and possible modifications to the carrier’s operating model, including assigned seating, are all possibilities. All these are within the confines of Southwest’s low-cost business model but part of moving to respond to changing market pressures.
This restructuring will be a significant change for Southwest, which was traditionally known for customer-friendly policies such as free check-in bags and the lack of assigned seating. It now is reality with the likes of Delta and United while fighting to become a premium carrier with its tiers of revenue-generating opportunities.
These are broader industry shifts, too, as the rise of new competition coupled with rising global fuel prices has forced airlines to take a second look at costs and revenue-levers; many airlines are now playing up their premium services in search of higher yields. The Atlanta cuts highlight the near-impossible balancing act that Southwest faces: keeping its low-cost roots while trying to adapt to the changing landscape of the airline industry.
Restructuring in Atlanta is a step in a broader cost-cutting move to respond to pressure from investors and the aftermath of travel during the pandemic.
