Southwest Airlines warned employees of looming “difficult decisions” as the carrier faces pressure from activist investor Elliott Investment Management to boost profits.
The Dallas-based carrier’s chief operating officer, Andrew Watterson, said in a Sept. 19 video to workers that the airline’s soon-to-be-announced strategy will include route and flight network modifications, Bloomberg reported, citing a transcript.
“There are some difficult decisions coming as well,” he also said, telling employees that “bigger changes for some cities” that were “not city closures” are coming.
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“We’re trying to get more out of what we already have, but getting our costs under control is not going to be enough, because we’re not going to do this on the back of employees or customers. Therefore, it has to be on the revenue side that we make the traction to get our profitability and equation balanced,” he said, the outlet reported.
FOX Business reached out to Southwest for comment.
The remarks come amid an ongoing activist investor challenge from Elliott Investment Management, which has advocated for numerous changes at Southwest to improve its financial performance, and ahead of the airline’s Sept. 26 investor day.
One of the first major changes occurred earlier in September, when Executive Chairman Gary Kelly announced he planned to retire next year. Southwest also said six other board members will depart in November.
Kelly said previously that the airline “has been pursuing meaningful, tactical changes to the route network; revenue management techniques; and marketing, merchandising and distribution methods” and conducting a “thorough” analysis of the company’s strategy since last year.
Southwest said this summer it would start assigning seats and offering premium seating options in the future. It will also start operating red-eye flights next year.
Southwest said in July it would “provide more details about its comprehensive plan to deliver transformational commercial initiatives, improved operational efficiency and capital allocation discipline” when it holds its investor day.
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The airline generated $7.35 billion in operating revenues in the second quarter, marking a year-over-year increase of 4.5%. Its quarterly net income fell 46% year over year to $367 million.
It flew over 137 million passengers last year.
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FOX Business’ Daniella Genovese contributed to this report.
