Southwest Explains its Plan

The airline held its long-awaited investor day this week. Did it change anything?

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Dear readers,

Following Southwest's investor day on Thursday, I have three main thoughts.

First, I appreciate our capitalist society in which a single sophisticated and aggressive investor can push a company to get its act together.

Second: What took this airline so long?

And third: poor Bob Jordan, who shared uninspired opening remarks riddled with clichés (like "we're laser-focused on execution" that will create "tremendous value" for shareholders) and answered most questions in the most boring way possible. C’mon man: are you even trying to save your job?

I realized within the first few minutes of his speech that Jordan wasn’t going to take responsibility for Southwest’s recent underperformance, or its inability (for years) to get with the times. I knew it from his first real point, when Jordan told investors "it's no secret" that the manufacturer's delivery delays made it "very difficult to run a business.”¹ Next, he blamed post-pandemic "labor challenges," which he noted caused staff shortages and later led to higher costs. Finally, Jordan hit the third leg of his greatest-hits collection, telling us that customer preferences changed after the pandemic — not just on product, but also on where they wanted to go.

I'm tired of Jordan’s blame game — need I remind you that all of these trends have been apparent since at least 2022 (and maybe earlier), and at least three of Southwest’s competitors responded adequately to them? — and I am shocked that Southwest led with a rehash of this woe-is-us argument on the day management intended to convince people it was ready to change. I believe Jordan has wished for too long for the ghost of Herb Kelleher to save him and magically return the airline to the good times (when customers relished open seating and labor loved the CEO).²

Those times have not returned, though management was thrilled on Thursday to trot out an auspicious investor update — how’s that for timing? — that third quarter RASM will be much better than expected (up 2-3 percent year-over-year, rather than flat-to-down 2 percent.) While management deserves some credit, possibly for figuring out how to use its new revenue management system, this development speaks mostly to macro-industry trends, including muted seat growth by competitors and strong demand, as well as a one-time phenomenon — the July CrowdStrike outage, when competitors struggled.

After Jordan’s milquetoast introduction, we eventually got to the meat of the investor day, which executives have teased for months as their chance to tell their story. But it wasn’t that interesting, because Southwest had already announced most of its initiatives, including changes to seating, new developments in the network, and efficiency improvements. I can’t say I was impressed.³

Despite my negativity, and my nagging belief that Jordan will "retire" in the not-too-distant future,⁴ I think Southwest will be OK. The brand is strong, and the airline is finally pursuing rational measures. I suspect no one at Southwest will publicly thank Elliott, but readers on the inside tell me there’s an understanding that the airline might have needed the push. Kudos to Elliott (and capitalism) for moving things along.

So what did Southwest executives discuss at investor day, once Jordan finished blaming everything but his own stubbornness and poor performance for the airline’s issues?

Let's take a look.