Is Southwest Airlines on the verge of breaking from past practice and following the pack to charge baggage fees?
The topic came up during a recent Southwest earnings call. At least a few industry watchers said they believe Chairman and CEO Gary Kelly’s response to an analyst’s question indicated that executives at least are thinking about it.
Southwest is McCarran International Airport’s busiest carrier.
The airline differentiates itself from most others by not charging extra for passengers’ first two bags. The company’s “bags fly free” mantra has been one of the airline’s signature slogans.
Kelly didn’t say Southwest would never charge a fee, but he was clear that there won’t be any changes in 2014 as the airline focuses on developing international routes and integrating AirTran into its system.
“Right now, it’s our belief that we get more customers and more revenue by not charging for bags,” Kelly said.
But then, Kelly qualified his statement.
“If, over time, if customers prefer the unbundling approach, sort of an a la carte approach, and they understand it and they favor that, well, we’d be crazy not to provide our customers with what they want. But as I mentioned earlier, our focus right now to finish out this year and for 2014 is going to be to implement international service at Southwest Airlines ... and finish the AirTran integration. A change in the fee structure would be, I think, a significant distraction.”
It doesn’t sound like Kelly is invoking Caesars Entertainment’s “We-implemented-resort-fees-because-our-customers-wanted-them” justification.
Instead, it sounds like he is saying: If customers prefer a fare model in which the base cost is low but you’re going to get nickel-and-dimed with fees for everything from seat selection to baggage and carry-on charges, we’ll accommodate you, especially if it adds to our bottom line.
Southwest has always been a “never-say-never” airline. It began flying long hauls from coast to coast. It used to give customers a free round-trip ticket for every 16 one-way trips they purchased. It never flew nonstop from Las Vegas to Dallas but plans to soon. It’s also on the verge of flying internationally.
The big question will be whether customer loyalties would change if the airline started charging bag fees.
Most of Southwest’s biggest fans are extremely loyal, and I believe they’d stay onboard, especially considering that most of Southwest’s competitors already charge for luggage.
In the meantime, Southwest customers should take every opportunity to tell the airline they love its bags-fly-free policy and will remain loyal if the company keeps it that way.