Southwest Airlines' investor day: 3 things to know ahead of 'pivotal' event

By Claudia Assis

Thursday's investor day comes as the airline struggles to return to profitability

Don't expect sedate victory laps and slideshows at the Southwest Airlines Co. investor day, scheduled for Thursday.

Well, there may be slideshows. But it won't be business as usual for Southwest (LUV), which is facing investor activism and has made changes to its decades-long policies that have struck at its very core.

Here are three things to know ahead of the investor day.

Turnaround plan: Southwest has told employees that there are "difficult decisions" ahead as the troubled airline seeks to return to profitability under pressure from activist investor Elliott Investment Management. The company is expected to tell investors how exactly it plans to go about those decisions in some detail.

A "pivotal" investor day: Recent changes have struck at the heart of Southwest operations, and Thursday's investor day will be "pivotal" as the airline "finds itself [with] a challenged network/product," Jefferies analyst Sheila Kahyaoglu said in a note Wednesday.

There's the company's aging fleet of Boeing Co. (BA) jets, "bloated" costs and declining estimates of profitability ahead, to name a few problems. So Southwest is likely to show investors "qualitative financial goals" at the event instead of merely targets, Kahyaoglu said.

Better guidance for unit revenue might be in the cards, because jet-fuel prices have dropped.

Assigned-seat policy, red-eye flights and other changes: Investors will be keen to hear the details of Southwest's key pivots toward premium and assigned seating, a break with its hallmark open-seating policy.

Southwest announced the changes over the summer, but it remains to be seen how it will reconfigure its jets, particularly its older aircraft.

"While cabin configuration will be important for longer term relevance, we believe cost action and network initiatives will be more meaningful to near term earnings recovery," Savanthi Syth at Raymond James said in a note Wednesday.

Southwest has also announced ending or slimming down operations in some airports, but Syth said that "counter to some expectations, we do not expect Southwest to exit the Hawaii market albeit intra-Hawaii flights could be reduced following the expansion of red-eye flights to Hawaii."

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-Claudia Assis

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09-25-24 1258ET

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