You do realize Cranky Flier is a Blog (opinion) site and nothing has actually happened yet right?
Might want to cool your jets just a little.
To the Board of Directors of Southwest Airlines and Fellow Shareholders,
Southwest Airlines has long been admired for its culture and customer loyalty. Yet under current leadership, these strengths are eroding. The winter storm meltdown of 2022 was not merely a weather event—it was a leadership failure. While operational systems collapsed, the greater damage came from the absence of credible, decisive communication from CEO Bob Jordan.
In a crisis, leadership is measured not only by operational recovery but by the ability to preserve trust. Mr. Jordan failed on both counts. His delayed, vague, and overly reassuring statements left customers, employees, and regulators without confidence in the company’s direction. The result: reputational damage, regulatory scrutiny, and billions in lost shareholder value.
This weakness has been compounded by financial underperformance and a failure to deliver on transformation:
- 2024 Results: Despite record revenues of $27.5 billion, net income was only $465 million—flat year-over-year, with earnings per share stagnant at under $1. Shareholders saw no meaningful profitability growth despite management’s claims of “positive momentum.”
- 2025 Results: The first quarter of 2025 delivered a net loss of $149 million, even as revenues hit a record $6.4 billion. The second quarter produced only $213 million in net income, with revenue per available seat mile (RASM) down and costs per seat mile (CASM-X) up. By mid-2025, analysts were already forecasting further earnings misses.
- Transformation Failure: In September 2024, Southwest unveiled its “Southwest. Even Better.” plan, promising transformational change—assigned seating, new fare categories, and $4 billion in incremental EBIT by 2027. Yet execution has faltered. Basic economy rollout has underperformed, RASM has declined, and cost inflation has outpaced revenue growth. Instead of transformation, shareholders see incrementalism and missed opportunities.
- Broken Promises: For decades, “Bags Fly Free” was Southwest’s brand differentiator. Mr. Jordan himself defended the policy as central to customer trust. Yet in 2025, he reversed course, introducing bag fees and defending the move as “low risk” and “customer choice.” This pivot undermines credibility with both customers and shareholders: if leadership abandons the very principles that built Southwest’s brand, what else will be sacrificed?
---
The Future Outlook: More Failures Ahead Without a Pivot
Independent analyses of Southwest’s trajectory point to continued financial strain if decisive action is not taken:
- Forecast Withdrawals: In 2025, Southwest pulled its financial guidance amid softening leisure demand and economic uncertainty. This signals management’s lack of confidence in its own projections—a red flag for investors.
- Margin Compression: Rising costs per seat mile (CASM-X) continue to outpace revenue growth, eroding profitability. Without structural reform, margins will shrink further in 2026 and beyond.
- Debt & Capital Pressure: With significant debt repayments due in 2025–2026, Southwest risks reduced financial flexibility. Fitch Ratings has already flagged a negative outlook tied to capital allocation and leverage.
- Transformation Risk: If assigned seating, ancillary revenue, and IT modernization continue to underperform, the promised $4 billion EBIT uplift by 2027 will not materialize. Instead, shareholders face stagnation or further losses.
- Erosion of Differentiation: By abandoning “Bags Fly Free” while failing to deliver superior reliability, Southwest risks losing its unique identity—becoming a commodity carrier without the cost advantage of ultra-low-cost rivals or the premium positioning of legacy airlines.
If the company does not pivot soon, further financial failures are inevitable: missed earnings, margin erosion, credit downgrades, and long-term brand dilution. Shareholders cannot afford another cycle of broken promises and incremental fixes.
Our Demands
We call on the Board to:
1. Strengthen Crisis Leadership: Appoint a Chief Operating & Communications Officer with proven crisis management experience.
2. Accelerate True Transformation: Deliver on promised structural reforms—assigned seating, ancillary revenue, and IT modernization—on time and with accountability.
3. Reevaluate Succession Planning: Consider whether Mr. Jordan possesses the vision and crisis credibility required to lead Southwest into its next chapter.
4. Protect Shareholder Value: Implement a credible turnaround plan that restores profitability, preserves brand trust, and prevents further erosion of competitive position.
Southwest’s brand was built on trust, reliability, and innovation. Shareholders deserve leadership that embodies those values not only in calm skies but in storms—and that can deliver a future of growth, not decline.
Respectfully,
Leaked internal memo, the mic got dropped in swamechs face.
