Southwest Airlines has been reeling. The airline recently updated its forecast for the second quarter and it said that it wouldn't hit the worst-case scenario for its revenue per available seat mile.
In a recent SEC filing the airline said that its previous estimate for this key airline-operations benchmark, a drop of 1.5% to 3%, had been revised to a decline of 4% to 4.5%.
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The airline has responded by going into austerity mode. It has slashed routes, cut back its service to Atlanta, and allowed its head count to drop by nearly 2,000 people.
The Dallas carrier, which had lamented the lack of airplanes that Boeing hadn't delivered, now might be happy about the delay since it does not have the customers needed to fill those seats.
The bleak results have led to calls for management changes, including the ousting of CEO Bob Jordan and Chairman Gary Kelly. So far, the airline's board has resisted those changes, but that does not mean some other major changes aren't on the table.
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Some observers have hinted that the changes might include a new boarding process and the creation of premium seating. Those changes would be massive for an airline that has never offered first class or any sort of premium seating.
Jordan, however, has pushed back on that topic.
Image source: Kevin Dietsch/Getty Images
Southwest CEO talks about boarding and seating
Southwest's boarding process is unique. Passengers are given boarding groups and numbers. There are ways to get an earlier number — you can pay for EarlyBird Check-In or buy a Business Select seat, which gives you a spot among the first 15 regular boarders — but it's a mostly democratic system.
Once passengers board, seating is open. Most passengers like the system but it costs the airline money. It can't sell premium seats, for example, those with more legroom.
That's something the airline has examined, and Jordan talked about it during his company's first-quarter earnings call.
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"We always want to understand what our customers want...," he said. ["I'll] just again tell you that we are very seriously studying this, and we're pretty deep in that study. ... [Nothing] to reveal today except that there are some interesting indications in terms of what this could mean to us and what it can mean to our customers."
Jordan seemed, however, to defend the boarding process.
"Are there other things you can do in boarding in particular? Our boarding process [we changed, I think,] a decade ago at this point," the executive said.
"It is very well received by our customers because it's very organized and the way you line up. We have worked hard to monetize that and give our customers choice. We give you choice around how you think about your boarding position and that's more important to some customers than others."
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Southwest pushes back on boarding changes
While Jordan made clear that the airline is examining everything, Jordan seemed to push back at the idea that it was going to make major changes.
"It's hard for me to think of how we can really, from a financial perspective or a customer-desire perspective, really push that even further," he said.
"I think the products that we've added really attack what our customers want. So being just blunt, it is hard to think about how to implement more products related to boarding."
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Chief Commercial Officer Ryan Green suggested that changes would come with products like Business Select and EarlyBird seating, which enables passengers to check in earlier and thereby get better spots.
"What we are doing and what we can continue to do is to get better at how we price those products and drive incremental yield from those ancillary products," he said.
"In total, our ancillary revenue in the first quarter was up 18% year over year. "...So we continue to push on optimizing for revenue there on our ancillary products, particularly the boarding products. But in terms of adding incremental products, it's tough to imagine how that would fit into the current boarding process."
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