Southwest Airlines (NYSE:LUV) shares were flat midday Monday, after the carrier warned employees that it will have to make “difficult decisions” ahead to boost profits as the carrier faces pressure from activist Elliott Investment Management, which has sought leadership changes at the company.
Southwest over the summer announced a host of major changes to its more than 50-year-old business model to drum up revenue. It plans to ditch open seating for assigned seats, offer seats with more legroom that fetch a higher fare and start red-eye flights.
It has also started allowing its flights to be listed on Google Flights and Kayak and has changed its ads to target more younger consumers, COO Andrew Watterson said in a video message to staff last week.
“Now, all that’s not enough. We also have to change our network,” Watterson said in the video.
“We have a couple of difficult decisions heading our way. It’s not station closures. But we need to keep moving the network to help us drive back to profitability,” Watterson said. “And so, I apologize in advance if you as an individual are affected by it.”
The airline isn’t planning to announce furloughs, but it could cut its footprint in certain cities and staff could transfer to other locations, according to a person familiar with the matter. The airline is seeking to reduce costs and focus on profitable flying, the company has said.
LUV shares captured two cents to $29.06.