Episode summary
Why Southwest Finally Ditched Open Seating and ‘Bags Fly Free’ | WSJ's Bold Names
The Journal
· · 23 min · Hosts: Tim Higgins · Guests: Bob Jordan
Summary
Southwest Airlines is remaking its business model around assigned seating, bag fees, extra legroom, and broader product tiers, and Bob Jordan argues the changes are being driven by customer demand rather than a desire to imitate rivals. He says about 80% of customers wanted assigned seating, and he frames the overhaul as the airline’s most transformational set of initiatives, while insisting the brand’s core values and hospitality are unchanged.
Jordan defends the end of “bags fly free” as a rational tradeoff that can add about $1 billion a year in revenue, and he says the company has also ended fuel hedging because the premiums became too expensive. He portrays the activist pressure from Elliott Investment Management as a catalyst that added urgency, not a source of new ideas, and says Southwest has done more in the last year than at any other point in its history.
He also pushes back on online criticism, saying booking data does not show customers abandoning Southwest. Looking ahead, he says the company is focused on optimizing the new model and keeping long-haul international and premium options on the table if customers keep asking for them.
Key takeaways
- Bob Jordan says assigned seating and bag fees were adopted because customers wanted more certainty and more choice, not because Southwest wanted to copy rivals.
- Jordan says ending free checked bags should add about $1 billion a year in top-line benefit, which he argues is essential to improving shareholder returns.
- He credits Elliott Investment Management with adding urgency, but says Southwest’s transformation was already underway before the activist campaign.
- Jordan says Southwest is not seeing evidence that customers are booking away, despite loud social-media backlash to the changes.
- The airline ended fuel hedging because premiums were costing about $150 million a year, according to Jordan.
Notable quotes
“80% of our customers wanted assigned seating. We put together the the most transformational set of initiatives this company has ever seen”
“we went to bed one day using open seating and woke up the next day and assigned seating”
“what Elliott brought was a, you know, kind of a kick in the pants to move faster”
“you either have another billion-dollar idea that you can execute or you're going to accept the fact that you're going to have very underwhelming financial performance relative to your peers”
“the evidence is that we we we were paying about 150 million a year in premiums”
How the episode opens
This week on Bold Names, we're talking to Bob Jordan. He's the CEO of Southwest Airlines. The company is going through a lot of changes and assigned seating is just part of that.
We get into that and much more. So, fasten your seat belts, put your tray table up cuz we're taking off. Bob Jordan, thank you for joining us here on Bold Names today.
Really excited to hear about all the changes at Southwest. And when I think of Southwest, I think of a few things. Super friendly people, uh, cheap fairs, uh, free check baggage, and open seating.
Now, we've seen some changes. Some of those things have gone away. Most notably, in the last month or so, you have uh gone to a model where you're assigning seats to people.
How has that very big change uh gone for you at this point? I mean, I remember it used to be like church. You could sit anywhere.
Well, uh, you know, we're driven by the customer. This is all about pursuing what the customer wants. Her Herb, our founder, always said, "If you don't change, if you don't follow the customer, you die.
And 80% of our customers wanted assigned seating. We put together the the most transformational set of initiatives this company has ever seen is really a change to the business model. Again, our our product, you we added extra leg room, kind of a pseudo premium.
We added uh a different boarding. We added assigned seating. We've added all kinds of partners.
We can now connect you to uh you know every geography in the world at this point. So a a lot of fundamental changes. But at the end of the day it's all about number one what our customers want and number two not losing our values.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- southwest open seating
- assigned seating transition
- bag fees
- activist pressure
- fuel hedging
Companies and tickers mentioned
- LUV
- Southwest Airlines
- Elliott Investment Management
Watch the episode
Watch “Why Southwest Finally Ditched Open Seating and ‘Bags Fly Free’ | WSJ's Bold Names” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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