Southwest to get rid of open seats, offer extra legroom in the biggest change in its history

Southwest Airlines is ending open seats and will offer extra legroom on its planes as growing pressure on the carrier to boost revenue prompts the biggest changes to its business model in its 53 years of flying.

The airline plans to start selling the first flights that will offer extra legroom next year, it said on Thursday. It also plans to start night flights, starting in February.

Southwest executives have said for years that they were considering such changes and hinted in April that the airline was seriously considering assigning seats and offering additional legroom options. Currently, the airline places customers in one of three boarding groups and assigns a number, starting a mad dash to check in the day before the flight. Customers can board earlier, however if they pay for a higher priced ticket, they will get a better boarding position.

When travelers choose a Southwest competitor, the airline found in its research that the open-seat model was the No. 1 reason for that choice, the carrier said in a release outlining the changes. She also said that 80% of her customers prefer a fixed position.

“While our unique open-seat model has been part of Southwest Airlines since our inception, our thoughtful and extensive research makes it clear that this is the right choice — at the right time — for our customers, our people and our shareholders CEO Bob Jordan said in a press release Thursday.

However, Southwest did not reveal any changes to its beloved two free checked bags policy.

The airline is now under even more pressure to segment its product like other airlines after activist investor Elliott Investment Management unveiled a nearly $2 billion stake in Southwest in June and called for new leadership as the carrier underperformed rivals .

Southwest reported second-quarter earnings on Thursday, which fell 46%.

Southwest has been working on the seat changes for nearly a year, and Jordan told CNBC’s “Squawk on the Street” Thursday that it was unrelated to Elliott’s push for leadership and policy changes.

Elliott sought replacements for Jordan and Southwest president Gary Kelly, both Southwest veterans of more than three decades.

Jordan dismissed those calls Thursday and said Elliott “has shown no willingness to engage in any meaningful conversation.”

“We’d be happy to do that, but it’s hard to have a one-sided dialogue,” he told CNBC in the interview.

Elliott did not immediately respond to a request for comment.

Southwest said it expects about a third of the seats on its Boeing 737s to offer “extensive legroom, consistent with that offered by industry peers on narrow-body aircraft.” The Federal Aviation Administration would have to approve the cabin layout, the airline added.

The Dallas-based carrier has been proud and consistently profitable for most of its five-plus decades of flying with its simple business model. Jordan said last month that not assigning seats was easier when planes weren’t so full.

Analysts criticized Southwest for moving too slowly. Rival carriers offer a range of options to upsell customers, such as extra legroom, premium economy or business class. Other airlines, however, like it Delta, United and Americanfour years ago it took a cue from Southwest and ended flight change fees for most tickets.

Southwest will provide more details about the upcoming changes at an investor day in late September.