Will Southwest Airlines' move to end open seating work?

Southwest Airlines' plan to eliminate open seating is one way for the company to raise much-needed revenue, but it comes with the risk of alienating loyal customers. The unusual practice of letting passengers choose their own seats once they board the plane was created by Southwest's egalitarian-minded founder, Herb Kelleher, and has been central to the airline's brand image for more than 50 years. But the feature is about to end, torpedoed by disappointing earnings and share performance since the pandemic and pressure from activist investor Elliott Management. The Dallas-based airline last week announced it would pivot to assigned seating instead. It plans to share more details at its investor day in September. The company also plans to offer seats with extra legroom - yet another departure from Kelleher, who disliked dividing airline seating into different classes of service. Southwest said the new cabin layout will require approvals from the U.S. Federal Aviation Administration and is expected to be available for bookings in 2025. The lack of assigned and extra-legroom seating has been one of the biggest obstacles to Southwest's ability to attract premium travelers, said Henry Harteveldt, founder of travel consultancy Atmosphere Research Group. "As a business, you always want to give your customers a reason to pay you more," he said. Investors and analysts say the company had little choice but to evolve. Shares have lost nearly half their value in the last three years, during a time when the S&P 500 index has gained 25%. The company's trailing price-to-earnings ratio is above 33, far exceeding the industry median of 4.86, and just two analysts of 18 have a "buy" rating on the stock, according to LSEG data.<br/>