Key facts
- Southwest Airlines is planning a significant operational transformation.
- The Boeing 737 MAX 7 is anticipated to enter revenue service in 2027.
- Southwest is exploring new offerings like airport lounges and trans-oceanic flights.
- The airline will continue to focus solely on the Boeing 737 MAX family.
- Elliott Investment Management has criticized Southwest's pace of change.
Southwest Airlines is contemplating a significant overhaul of its operations and services. Chief Operating Officer Andrew Watterson indicated that the airline anticipates the Boeing 737 MAX 7 aircraft will commence revenue service in 2027. Watterson stated that Southwest remains focused on the MAX family and is not looking to add another aircraft type, believing diversification does not come through a second fleet type and could increase risk. The MAX 7 is awaiting certification from the U.S. Federal Aviation Administration, after which Southwest plans about six months of internal work. Watterson noted that the MAX 7 delay has limited the airline's ability to match aircraft size with demand, resulting in too many larger aircraft and not enough smaller jets for periods or markets with lower demand. Beyond fleet updates, Southwest is evaluating potential new offerings such as airport lounges, the possibility of expanding into trans-oceanic flights, and introducing more premium seating options. The airline is also moving ahead with Starlink-powered Wi-Fi, expecting to have an aircraft serviceable with Starlink later this month and targeting equipping 300 aircraft by year-end, dependent on Starlink's equipment supply. Watterson acknowledged that activist investor Elliott Investment Management was correct that Southwest had been too slow to change, though many changes are already underway. He also believes investors have underestimated customers' willingness to pay for new products, with revenue per available seat mile serving as the "litmus test" for the success of these changes.