With Lounges & Transatlantic Flights, Will Southwest Airlines Finally Introduce First Class?

Southwest Airlines, once a carrier with all-economy flights that only flew domestically and recorded profits for 47 years straight, is a different airline today. It’s no longer as profitable as it once was, and because of this, activist investment firm Elliott Investment Management swooped in to demand changes. Elliott, a firm known for its heavy-handed approach to turning around struggling companies, has transformed the carrier into something that hardly resembles the Southwest of old.

Elliott wants to boost Southwest’s short-term profits, so it’s looking at what is working in the US airline industry now and, in turn, wants Southwest to do the same thing. Today, customers want to earn frequent flier miles to redeem for premium cabin travel and to fly in premium cabins on long-distance flights to exotic destinations. Southwest is already planning to open premium lounges and may soon launch transatlantic flights, so will it finally add first class?

Overview Of Southwest Airlines

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Southwest Airlines is the fourth-largest carrier in the United States. Unlike numbers one, two, and three (United Airlines, American Airlines, Delta Air Lines), Southwest does not operate long-distance flights, it does not currently have a lounge network or a first class cabin, and its fleet is all narrowbodies from a single aircraft family: the Boeing 737. Other than a brief stint flying leased Boeing 727s, Southwest has relied solely on the Boeing 737 from its inception in 1971.

Southwest doesn’t call them hubs, but its 12 “operating bases” across the US essentially act as hubs. These hubs are located in Atlanta, Baltimore, Chicago-Midway, Dallas-Love Field, Denver, Houston-Hobby, Los Angeles, Nashville, Oakland, Orlando, and Phoenix. Southwest originally focused on point-to-point flights with low fares, but it’s moved closer to the legacy carriers in recent years and is essentially a hybrid between the “Big Three” and the ultra-low-cost carriers like Spirit Airlines.

Southwest’s entire fleet is configured with only economy seats: 143 on its Boeing 737-700s and 175 on its Boeing 737-800s, as well as its Boeing 737 MAX 8s. It is introducing new extra-legroom seats, but still no first-class seats. Its planes come with Wi-Fi and powerports, but no seatback screens. Southwest has historically differentiated itself with unique quirks, like open seating, generous policies such as two free checked bags, along with friendly service and robust schedules.

Domestic First Class And Who’s Offering It

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In the US, the big three legacy carriers configure their narrowbody aircraft (including regional jets) with domestic first class cabins. These cabins are typically made up of large recliners that are similar to international premium economy seats. Oftentimes, airlines use the same seat model for both cabins, such as the Collins Aerospace MiQ, and United Airlines even markets domestic first class as Premium Plus on transatlantic Boeing 737 MAX services.

United, American, and Delta offer domestic first class on virtually all of their mainline narrowbody planes and regional jets. Additionally, Alaska Airlines and Hawaiian Airlines offer domestic first class seats on their narrowbody fleets. Rather uniquely, Spirit Airlines has long sold first class seats, currently marketed as “Go Big”, and it was the only US budget airline to do so for years. These tickets offered a bigger seat comparable to competing first class cabins, but without additional amenities.

Frontier Airlines announced that it would introduce first class seats in late 2025. Eight of these would be installed across two rows, and these cabins are to feature proper first class seats, but with a stripped-down soft product comparable to what Spirit Airlines offers. It’s also believed that JetBlue is working on a similar product, tentatively called “Mini Mint,” which would be installed on the airline’s non-Mint aircraft and would use the Collins Aerospace MiQ.

Will Southwest Airlines Introduce First Class

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With the company’s current trajectory, the answer is almost certainly yes. Company leadership is already known to be exploring numerous new strategic moves, such as transatlantic flights, and has already confirmed plans for lounges while also introducing extra legroom seating. The company is increasing its product and pricing segmentation, so adding further options appears to be an inevitability.

Frequent flier programs are how the nation’s most profitable airlines make their money, and premium cabins not only make an airline look more desirable, but they also give customers more incentive to earn and use miles. Spending more money on first class means you earn more miles, which you can then redeem for premium cabin travel. Premium is the name of the game in the US today, and adding first class cabins would entice potential customers to sign up for Southwest’s loyalty program.

Premium cabins also bring in more money on fares than economy. First class seats don’t typically take up significantly more space than economy seats, but airlines charge hefty premiums, and the seats sell. Delta, for example, is reported to be selling nearly 90% of its first class seats, a significant improvement from a decade ago when most of its first class seats were filled with upgrades. In today’s market in the US, configuring planes with only economy seats is leaving money on the table.

Long-Term Vision For Southwest Airlines

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Southwest Airlines is a public company with an obligation to its shareholders, and Elliott Management is especially focused on short-term profits. If the airline that was successful for 47 years straight suddenly can’t make money, then it may be a signal that something needs to change. All airlines lost money during the pandemic, but since then, Delta and United are soaring, Alaska Airlines is reporting healthy profits, American is struggling, and everyone else has been left in the dust.

Elliott is essentially looking at what Delta and United are doing and attempting to replicate it at Southwest. The open seating and free checked bags are gone in an effort to boost ancillary revenue. New credit card options add depth to the company’s Rapid Rewards loyalty program, while lounges and extra-legroom seating not only add premium options but also serve as additional perks for committing to Southwest Rapid Rewards.

Southwest has entered into interline agreements with Icelandair and China Airlines. While these are basic forms of cooperation, they do set the stage for Southwest to progress into closer relationships with these airlines. Even now, Southwest has greatly expanded its reach of where it can send its passengers, and it’s reported to be exploring flights to Iceland. Adding first class cabins is simply the next logical step.

Is The New Southwest Airlines Sustainable

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Southwest Airlines is essentially trying to be like everyone else. The problem is that fundamentally, it isn’t. United and Delta operate huge fleets of widebody airliners with global networks, and they’ve built up premium brands for years. Even American Airlines is struggling to compete with Delta and United because it elected to move down-market during the 2010s, it’s been moving away from seeking corporate contracts, and its international network is significantly smaller.

Southwest Airlines is attempting to beat Delta and United at their own game, but Southwest has had a fundamentally different business model and target for decades. When looking at the carrier’s broad history, the 2020s are an anomaly. Years of straight profits with little interruption, being a hybrid airline with unique quirks, is the norm for Southwest. The question then becomes, has the business environment changed drastically enough to warrant such a significant pivot?

Not all of Southwest’s recent changes are bad. No one will complain about the addition of first class seats, and many of Southwest’s operational changes have been a net positive. But with the carrier introducing assigned seating and adding fees for checked bags, some have questioned whether the carrier that everyone knows and loves is disappearing. When Southwest is just like everyone else, then why should passengers choose it?

Rundown Of Southwest Airlines

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Southwest Airlines thrived for 47 years and weathered numerous storms that brought other airlines to their knees. It did this primarily through building a brand that had a cult following, as it was arguably the most unique large airline in the country. It was different, and it was one of the most admired companies in the US. But times have changed, and customers are flocking to the legacy carriers, while Southwest’s share of the pie is shrinking.

Southwest’s leadership and Elliott Investment Management both seek short-term profits, but Southwest’s leadership also has to ensure the company’s long-term survivability. Elliott is looking to turn the company around quickly and cash out. While the airline is making more money now, questions remain about whether some of the changes that Southwest is making are alienating its once-loyal customer base, and what kind of impact this could have on the company’s future.