DALLAS – Southwest Airlines (WN) has just announced significant updates to its passenger experience, in addition to improving its financial performance and driving shareholder value.

The move is a reaction to the airline's second quarter performance, which "fell short of what we believe we are capable of delivering," according to CEO Bob Jordan.

But the CEO assures us, "We are taking urgent and deliberate steps to mitigate near-term revenue challenges and implement longer-term transformational initiatives that are designed to drive meaningful top and bottom-line growth."

This "strategic transformation" is a meaningful one, as it sees the airline move along with plans to "assign seats, offer premium seating options, redesign the boarding model, and introduce redeye flying."

As per an airline press release, while sharing its first quarter financials in April, WN reviewed its customer preferences and expectations of its products, including its 50-year-old open seating policy.

Assigned, Premium Seating

In what is a major change from the LCC seating model, WN has decided it will now assign seats and offer premium seating options on all flights. That's a big change.

The reasoning behind this decision is that "preferences have evolved with more Customers taking longer flights where a seat assignment is preferred." The airline also cited the lack of assigned seating as "the number one reason" to chooses a competitor.

To make sure the seating policy change was feasible from a logistics aspect, WN conducted live operational testing and "over 8 million simulation-based boarding trials." Data from these trials showed that "80% of Southwest Customers, and 86% of potential Customers, prefer an assigned seat."

Southwest will also provide access to the premium, extra legroom section of the cabin, which many customers strongly prefer, according to studies. To be sure, the seat redesign by RECARO currently underway will also make the airline's allocated and premium offering more attractive.‍

Although the precise arrangement of the cabin is still being designed, WN says it anticipates that approximately one-third of the seats in the fleet will have more legroom than standard, which is comparable to what its peers in the industry offer on narrow body aircraft.

Edward Russel has cited Savanthi Syth from equity research firm Raymond James as estimating that WN "could boost incremental revenue by $600-$2,000mn with the adoption of assigned seating" while "Premium seating could lift revenue another $500-1,000mn."

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Redeye Flights Now on Sale

Southwest also announced it is adding 24-hour operation capabilities with the introduction of overnight, redeye flights starting Valentine's Day 2025 in five initial nonstop markets: Las Vegas to Baltimore and Orlando; Los Angeles to Baltimore and Nashville; and Phoenix to Baltimore.

Redeye flying is anticipated to generate additional revenue and cost savings, allowing the carrier to finance almost all new capacity over the next three years without having to deploy more aircraft capital.

Redeye flying is also projected to contribute to ongoing turn-time reductions through new technologies and procedures. In the upcoming schedules, the carrier intends to gradually add more redeye flights as part of its multi-year transition to a 24-hour operation.

New EVP Commercial Transformation

To spearhead the development and rollout of these changes, Ryan Green, previously Executive Vice President, & Chief Commercial Officer, will take on the new role of Executive Vice President Commercial Transformation.

According to WN, "Green has deep knowledge of Customer trends and currently leads the work on cabin transformation. He previously directed efforts to transform Southwest Airlines' Rapid Rewards loyalty program and the digital Customer experience. He reports to President, CEO, & Vice Chairman of the Board Bob Jordan in this new role."

"I'm eager to lead this next step in our transformation to serve our Customers with an even better Southwest. In addition to meeting the evolving needs of Customers and fostering more loyalty, these changes are expected to generate additional revenue as we capitalize on greater demand for Southwest Airlines and offer Customers the ability to purchase premium seating options," Green said.

During its Investor Day in late September, WN will provide additional information about product designs, cabin layout, scheduling, and incremental financial value, as the aforementioned changes, if they pan out, will see the Dallas-based airline mature its customer segmentation, a signal that the era of budget airlines is ending, at least in the U.S.