Is Southwest Done With Drama?
Its third quarter earnings call was a tepid affair — good news for an airline that has had considerable controversy. Also: United will resume A321neo deliveries after a pause for technical issues.
Dear readers,
By now, you know that Southwest and Elliott Management have settled their feud (for now), as the airline agreed to name six new board members, including five recommended by the investment firm. You might think the happiest person in the airline industry is Bob Jordan, who retains his job as CEO — though I bet he'll face challenges working for active and experienced board members, many of whom have little loyalty to him.
Bur forget Jordan. I think the bigger winner is me.
I’m thrilled because I created this newsletter to cover the minutiae of airline commercial strategy, not to document the nasty back-and-forth between an aggressive Wall Street firm and a surprisingly tepid airline management team that couldn’t get its employees to rise up to save it from outside aggression.1 If this deal means I’ll hear less about Elliott, I’ll be happy. I want to return to writing about what’s happening commercially at America's largest domestic airline.
If you listened to the Oct. 3 episode of The Air Show — that’s my podcast with Brett Snyder and Jon Ostrower — you know I don’t think Southwest is hopeless. Its recent changes make sense and its customers want it to succeed. As long as management leaves the past behind, I think the airline will turn around and start producing better results, whether under Jordan or his successor.
By shrinking its capacity growth and harnessing its new revenue management system, the airline eked out a net profit of $67 million on total operating revenues of $6.9 billion.2 That’s not a great result for the typically strong third quarter, but this is an OK start, considering Southwest has not yet implemented any of the new revenue-generating initiatives it outlined at investor day last month.
What were the highlights on the earnings call? Let’s a take a look.