SOUTHWEST AIRLINES CO

Southwest Airlines was founded in 1966 by Herbert Kelleher and Rollin King, and incorporated as Air Southwest Co. in 1967. The company planned to operate as an intrastate airline, flying a Texas Triangle network between Dallas, Houston, and San Antonio. By flying only within the state of Texas Southwest would be exempt from regulation by the federal Civil Aeronautics Board, allowing it to undercut the prices of competitors. Three other airlines ( Braniff, Trans-Texas, and Continental ) sued to prevent the company from starting up. The lawsuits were resolved in 1970, and in 1971 the airline changed its name to Southwest Airlines. In 1975, Southwest began flying to other cities in Texas, and in 1979, after passage of the Airline Deregulation Act, it began flying to adjacent states. It started service to the East and the Southeast in the 1990s, and Denver in 2006, which is now its most popular destination. Southwest Airlines was profitable for 47 consecutive fiscal years, from 1973 through 2019.

Southwest Airlines encountered significant operational and financial difficulties in the 2020s, notably during the holiday meltdown in 2022 when it canceled over 15,000 flights. This event, caused by severe weather and outdated scheduling systems, led to a record $140 million fine from the U.S. Department of Transportation, and losses exceeding $1.1 billion. Elliott Investment Management, an activist hedge fund, capitalized on Southwest's vulnerabilities by acquiring more than 10% of the company's shares, advocating for leadership and operational changes to improve profitability. A settlement between Southwest and Elliott in October 2024 resulted in former CEO Gary Kelly stepping down as executive chairman and five Elliott-backed directors joining the board; however, CEO Bob Jordan remained despite Elliot's efforts to oust him. Under new oversight, Southwest initiated major changes, including its first-ever layoffs affecting approximately 15% of employees, ending its popular two free checked bags policy on May 28, 2025, transitioning to assigned seating beginning in 2026, introducing premium seating and basic fare options, adding red-eye flights, limiting flight credit validity to one year, listing flights on third-party platforms like Expedia and Google Flights, and establishing a codeshare partnership with Icelandair.