Southwest Sets Course For Prosperous 2027, As Elliott Scoffs

DALLAS—Southwest Airlines is facing its future at a pivotal period with a plan to cut costs, adjust its network, evolve product offerings, and extract value from its fleet and aicraft order book, moves it believes will get the business back to prosperity in 2027.

CEO Bob Jordan called it the “most transformational plan we have ever had,” and “very intentional,” with elements “uniquely available only to Southwest Airlines.”

“Our model is not broken but it is in need of continued calibration and enhancement,” Jordan told investors, analysts and reporters gathered here in Dallas. “Evolving is part of our DNA and we have done so successfully time after time … We are at another critical inflection point, and are moving quickly to implement changes. We are well positioned to usher in a new era of change, profitability and industry leadership.”

As part of its three-year plan Southwest will curb growth, slowing its hiring and expects to end 2024 with headcount down by roughly 2,000 from year-end 2023. It anticipates a further reduction in 2025 as attrition levels are projected to exceed its controlled hiring, driven in part by use of digital enhancements and artificial intelligence to modernize contact centers and airports.

Overall 2027 headcount will be flat to down compared to 2024.

That moderation in growth will result in excess aircraft, and the carrier is in discussions with Boeing to restructure the orderbook to realign with its plans. Southwest intends to offset CapEx with opportunistic fleet transactions, pursuing direct sales of its Boeing 737-800s, as well as sale-and-leaseback transactions. “We have 65-66 RFPs out, and those are for a combination of sale-leasebacks and sales of our -800s as part of our fleet modernization efforts,” said CFO Tammy Romo.  By 2031 it intends to retire all 571 of its NGs (-700 and -800s), noting ample flexibility with that schedule should it need additional lift.

“Our plan supports a complete fleet renewal to an all -7 and -8 fleet by the end of 2031 with an average age of five years,” said Romo.

Southwest expects its fleet strategy to reduce average aircraft CapEx to approximately $500M through 2027. Operational efficiencies—including improved aircraft utilization and removing five minutes of turn time through technology—are designed to fund nearly all new capacity growth over the next three years without incremental aircraft capital deployment.

“All growth through 2026 will come from efficiency initiatives like turn improvement and red-eyes,” said Jordan.

The day before its investor event the carrier alerted employees to significant changes in Atlanta, one portion of its network unable to maintain current service levels due to factors including aircraft delivery delays and changed post-pandemic booking patterns. More realignments are ahead for additional markets. Comparing its April 2025 schedule with April 2023, “what you'll see is about 10% of routes were cut, about 10% of routes are new, and about 45% of routes have had capacity adjusted to an extent greater than 25%,” detailed COO Andrew Waterson. “So overall, 65%--almost two thirds of our routes--have had consequential action during this period, and that will continue.”

Prior to its investor day, Southwest filed plans to remove 16 routes from Atlanta effective April 7, 2025, reducing its service from Atlanta to 22 nonstop destinations. The cuts include five Florida cities: Fort Lauderdale, Fort Myers, Jacksonville, Miami, and Sarasota. Analysis of OAG Schedules Analyser data shows Southwest faces direct competition from Delta Air Lines in all 16 markets and, once Southwest exits, Delta will be the sole operator on 11 of the affected routes. Based on current schedules data, the suspensions will remove about 19,000 weekly departure seats from Southwest’s Atlanta network, lowering its capacity from the airport by approximately 20%.

In Hawaii, where it has announced upcoming daily red-eye service to Las Vegas and Phoenix, Southwest is reducing interisland flying by 20% and redesigning timings to generate more flow within the island and to and from the mainland. “This is one example of us sharpening our focus in select markets, to accelerate performance improvement,” noted Watterson.

Core product offering changes are expected to drive the next wave of growth for Southwest, stated Ryan Green, EVP-commercial transformation. Its previously announced assigned seating is expected to go on sale in the second half of 2025, with the first flights operating that new model expected in the first half of 2026. 

“In addition to a seat assignment, customers will receive a boarding position number and will line up in order similar to how they do it today," Green explained. 

"Bags fly free” will also remain. “Extensive data driven research” determined the loss in trips flown from customer defection would overwhelm the value of incremental ancillary revenue from bag fees and result in an estimated $300 million revenue loss, the carrier said.

Studies also evaluated various premium seating options before settling on extended legroom, an offering expected to generate $1.5 billion in incremental EBIT in 2027. Using existing seats will increase speed to market and dodge supply chain challenges; Southwest expects to retrofit about 50-100 aircraft per month with extended leg room (ELR) configurations starting in the first quarter of 2025, completing retrofits late next year. On its -8 and -800s, 68 seats (of 175) will be ELR featuring 34” pitch; on its future -7s, 48 seats (out of 148) will be ELR featuring 34” pitch; and on its -700s, 40 seats (out of 137) will be ELR featuring 36” pitch. The -700 will lose a row and the -7 will lose two seats, while all other aircraft maintain current seat counts.

Building on its core product offerings, the airline will also venture into global airline partnerships beginning with Icelandair in 2025, through Baltimore. At least one additional partner carrier is expected to be announced next year. Vacation packages and updates to its loyalty program and credit card will also play a role in coming months.

Elliott Investment Management has dismissed the plan as “another promise of a better tomorrow from the same people who have created the problems we face today,” reiterating its stance that current leadership must change, and still intending to call a special meeting of shareholders.

Southwest’s CEO believes the strategy will create substantial value, describing himself as determined not to let pressure from its large activist investor distract from executing.

“There are so many more opportunities beyond this plan for Southwest, things like growth opportunities in international flying, but that's on hold until we earn our cost of capital,” said Jordan. “But this is just the beginning of our plan to create ‘Southwest Even Better.’”

Additional reporting by David Casey