Southwest said it expects its three-year reform plan to add $4 billion to company earnings in 2027 with a return on investment of 15% or higher.

“We’re now ushering in a new era at Southwest, moving swiftly and deliberately to transform the Company by elevating the Customer Experience, improving financial performance, and driving sustainable Shareholder value,” Southwest CEO Bob Jordan explained in a Thursday statement.

Southwest said it will outline its next steps in “a comprehensive three-year plan that builds upon the company’s unique business model for an even better Southwest.”

Former Spirit Airlines CEO Bob Fornaro will join the Southwest board of directors.

Elliot Management owns about 10% of Southwest shares.

Elliot wants to get rid of current management and force a comprehensive business review, insisting leadership change is needed to deal with the airline’s financial challenges.

Jordan said Elliot Investment shows no real interest in working with Southwest Airlines management.

“We have demonstrated that willingness time and again through our attempts and engagement, but time and again, Elliott has demonstrated little or no interest in collaborating with Southwest on how to deliver more shareholder value, focusing instead, as evidenced by their most recent letter and recent action, on tactics and on gamesmanship,” Jordan said.

On Wednesday, Southwest told its workers Atlanta service will be cut in 2025 with more than 300 flight attendants and pilots from the city facing layoffs.

What customers can expect

Changes for customers include assigned seating rather than open seating and premium seating with extra legroom and an updated boarding process.

“Southwest will offer extra legroom options with up to five additional inches of pitch for approximately a third of its seats while maintaining a standard economy seat pitch among the best in the industry,” the airline said.

That will mean 34 inches of leg room versus the standard 31 inches.

Bags will continue to fly for free, allowing passengers up to two checked bags at no extra cost.

Ryan Green, Southwest’s Executive Vice President Commercial Transformation, said in a statement, “We’ve already started rolling out modernized cabins with improved Wi-Fi, in-seat power, larger overhead bins, enhanced operational efficiencies, and optimized flight schedules. We will continue to build upon our unique competitive advantages, while adapting to consumer priorities in today’s dynamic environment.”

Anticipated savings

Southwest said the multi-year plan is expected to save $500 million in cost savings by 2027 through “minimized hiring,” improvements in corporate and scheduling efficiency, and capitalizing on supply chain cost savings.

The airline is attempting to “monetize the value of its fleet order book and drive a significant fleet modernization, with the goal of achieving an average fleet age of just five years in 2031.”

That is expected to yield roughly $500 million in reduced average aircraft expenditures through 2027.

Another critical link in Southwest’s financial plan is the $2.5 billion stock buyback.

“Southwest is balancing its capital allocation priorities to minimize capital expenditures on aircraft, continue investing in infrastructure that optimizes operations, and manage debt to preserve the airline’s investment-grade balance sheet, all while returning capital to Shareholders through dividends and share repurchases,” Southwest’s statement added.

Starting in February Southwest will offer 24-hour flight operations with redeye flights in key markets as part of the effort to maximize aircraft utilization.

Vacation packages called Getaways by Southwest will be rolled out in 2025, as well, allowing customers to customize vacation bundles with generous cancellation and no-fee change policies.