Southwest Airlines will charge for seat assignments, end free checked bags, and has cut mileage-earning on the cheapest fares by two-thirds. But that’s not all. The airline is explicitly introducing basic economy which will come with additional restrictions – like no changes and no standby – as well as no advance seat assignments. And they will start expiring flight credits.
- Starting May 28, flight credits will expire after 12 months
- But for basic economy tickets, flight credits will expire after six months
I never minded buying Southwest Airlines tickets, even when my plans were not yet certain, because if I cancelled the ticket – Southwest held the money – I could always use the travel credit later. That made it easier to purchase from them, and made it more desirable to do so than to fly competitors (especially competitors that I don’t fly often).
Between Alaska or JetBlue or even Delta, and Southwest, I had more confidence buying from Southwest. They’ve given up that advantage. But expiring flight credits is better for the balance sheet, since it writes off a liability, even though expiring flight credits is worse for incentivizing repeat business.
Here’s how they’re describing new basic economy restrictions, although note that they will begin upselling priority boarding apart from Early Bird check-in. Boarding early will begin to have value in the bag fee era, because customers will be bringing more things on board to avoid those fees – competing for limited overhead bin space.
While the airline may have maxed out the potential of its business model, and has underperformed financially, it still had a unique selling proposition in a market that has shifted to care more about differentiation than in the past.
However when businesses underperform, management loses license to act differently than the rest of the industry – because it looks like the decision to do so might be causing the problem. Management doesn’t lose their jobs when they do what everyone else does, taking the safe path of long-term underperformance or at best reversion to industry mean. For Southwest, though, that means giving up on hopes of returning to stock multiples that were the envy of every other airline.
Back to flying middle seats on United, I guess.
I think this is all designed to make Southwest a merger candidate. It’s business model is maxed out.
‘But, but.. it’s just business… it’s not a charity…’
Excessive greed. A loss for consumers and workers, alike.
Where are the corporate shills and oligarch bootlickers to defend Elliott Management?
I’ll wait.
Bye bye Southwest. It was fun while it lasted. Driving to Love Field to hop on “just another” airline will end.
No reason. Let’s look at American Airlines and DFW options.
Again, with whom, exactly? At this point, the sum of it’s parts is likely worth more than the whole (737s off to various off-shore carriers, assorted gates and slots to other airlines, the entire Concourse C at DEN ripe for a new entrant to the western US, etc.).
they better remove those hearts from their branding
And their points are about to be devalued, if you read their email carefully.
“While the airline may have…underperformed financially,”
Has it? Hard numbers vs. other US carriers.
Thanks.
We need to stop calling LUV a low cost carrier. their fares match everybody else and now with zero differentiation. No reason to book LUV except if that’s the only way to go.
No difference between them and any other airline now…..in fact they may now be worse than the other major airlines in some respects.
Business underperforms?? The flights I’ve been on for the last year have all been full. Rarely is there an adjacent seat open.
Say exactly what it is: a hedge/investment fund wanting MORE!! Southwest made money consistently but it’s not ENOUGH for Elliott.
Just how much MORE do these companies need?? EVERY industry the hedge/investment funds have invaded have done WORSE. Steel. Rail. Airlines. The only thing they’re good at is screwing things up, taking the profits and bailing. When Southwest runs aground (and it will), Elliott will be gone like the rats on a sinking ship they are.
Not that Southwest was ever a LCC, but now they’re definitely a HCC. And they should have purchased the A220 a decade ago to serve the smaller, underserved and high fare RJ markets. It can still fly coast-to-coast and only needs a 4,800 ft runway.
Agree with others that it’s unclear where their profit comes from now. CCs to infrequent flyers I guess. Before they had repeat buyers/commuters on their own dime (gone by expiring credits, slower boarding), families (gone w bag fees), loyalists (when I was in Chicago never even looked elsewhere, just flew sw from midway). Better use up all my points this recession summer.
If WN is going to compete only on fare and schedule, they will need to cut fares to match NK and F9. But Elliott won’t allow that.
Maybe WN will merge with AS, with a gate and route divestiture.
I remember Cerberus Capital buying Chrysler from Daimler. Straight into the outhouse of bankruptcy and a government guarantee for the bankruptcy to succeed. Cerberus lost about $1.3bn on that. So much for Wall Street analysts knowing anything about how to make a business more profitable.
But I see no reason to fly WN, unless they have a direct flight to where I’m going.
When you take away the things that make your company different, you take away the customers reasons for using your company as opposed to the competition.
It will be interesting to see.if they survive. It’s a crappy airline, but cheap with some positive fringe elements. Nickel and dime people while removing those positives leave it just a crappy airline.
Entitled leftist brats here would rather SW just go bankrupt like JetBlue, Spirit, etc., instead of allow them to adjust to the current competitive landscape and regain profitability.
The stockmarket has called the bluff of bloggers. $LUV up 8%!
I’m getting a little concerned now. Frontier and to a lesser extent, Spirit, will continue to siphon Southwest passengers in dozens of leisure markets. It’s obvious Southwest is trying to bolster revenue with this move but it will drive some customers to the aforementioned carriers. Then you’ve got Breeze, which is growing like wildfire and offers an excellent product, and options. I can’t see any airline merger for Southwest, unless they get super desperate. They aren’t there at this point.
1990, would you kindly do it in silence.
@Mantis — What took you so long? I knew someone like you would shill for the evil hedge fund. And I presume you do it for free. Enjoy carrying water for the oligarchs.
@mike s — No, you. Now, why have you switch names on us? Andy S, Mike P, etc., were just fine.
I think Mr. Romey nailed it. With Lina Khan gone, mergers and acquisitions might be back on the menu.
They have some special routes and convenient airports (Hobby, Love, Midway) but are no longer a LCC. I fly them sometimes, but usually not if AA,DL or UA is on the same route.
Will A-Listers still get same-day standby or flight change on the new basic? Was a benefit before on Wanna Get Away.
Extra time at the gate — for most passengers in other airlines, sitting down (or deplaning) is accompanied by a minute or two (per passenger) of getting that 40 pound “carry on” into the “coat rack” above the seat. But according to an article: “Flight delays cost airlines and passengers about $33 billion each year, according to government data. But experts say speeding up the boarding process is not really a priority for airlines — they’ve monetized everything about it.”
Even better, the real monetization comes from making the “cattle car” section of a plane so horrendous that a passenger will pay triple to get “civilized” like coach travel was decades ago.
Bye bye moving on to another airline. I still have choices.
I think this is a three-pronged issue for Southwest and a warning for the rest of the airlines. 1, Those big raises you gave out to those people are going to bite you hard! 2, Corporate raiders will come in and take over control of your company because they are sick and tired of meager ROI,S for them locking up money in those stocks, 3, Wait until the flying public gets tired of getting hosed ( Southwest better start thinking of First Class seats really quick ) and the rest of the airlines better watch their bottom lines, especially if Elliott is ownership of their stock. These lackluster performances of airline stock are going to be coming to an end.
I’m curious to know if Southwest surveyed customers and asking reason they preferred Southwest over other airlines. For me it was always the no bag fee. Now they’re just like everyone else, there’s no exception. I believe this will eventually be the cause of them going out of business.
I am really saddened by this news. I always felt that Southwest was a great way to fly. No baggage fees, you could change, cancel,or redo if it went down and have a credit. I could compensate the $99 annual fee with the fact that I could earn a decent amount of points and use them easily. Now points are going to be harder to earn plus I have to pay for a second suitcase. I was upset enough when they raised the price on checking the third bag. Now I will have to compare all fares. I was hoping they would add first class on their planes. It was the only thing that I felt they missed out on. Now they truly are like the other airlines. Very disappointing news
A few years back the Dean of the Harvard School of Business came to speak to a group of my company’s execs and top performers. His 90min talk focused on why following what they teach in the HSB will ultimately run your company out of business. He outlines 5 specific cases where US business had done this. There are many more. Southwest is following in their footsteps. By making these changes SWA no longer has any differentiation from any other airline. They are simply me-too and have make themselves into a commodity like all the other airlines. I fly a lot. I’ve chosen Southwest over other airlines despite less attractive routes and connections and price. SWA is rarely cheaper than American where I fly out of. But I chose SWA nonetheless because of 1) Open Seating, 2) Bags fly free 3) Always available frequent flyer seats. This announcement removes all of these. So why should I fly southwest? No reason in particular. For example: I used to fly southwest intro BWI to visit Harrisburg then drive 2hrs to get there. Now I will just fly American into Harrisburg because there is no difference between American and SWA any more. SWA, you hit a short term stock jump out of this but long term your revenues will decline faster than you can imagine. Legroom as companion pass are next folks. Count on it. I’m sorry to see you go SWA.
I guess this means the honeymoon is over. I will also be cutting up their credit card as well. If I don’t get the perks anymore they can shit in their hat. They aren’t the only airline in the sky.
Stupid move! I’ve flown them like A Lister Preferred with Companion level consistently for years. That’s the highest you can be with SW. I recall the Party Lounge seats in the old 737. Yup I’ve been with them for a long time! However these stupid moves by an investment company or a typical would always happens. They’re going to squeeze every dime push them to near bankruptcy or worse Take their money and move on. I can tell you right now this is the last year I’ll be flying with them. Fortunately for them as I live on the west, they still have the best assortment of flights and options and that forces me to use them. But with AA, Alaska, and even Delta starting to encroach their areas it won’t be long before they’re irrelevant. I used to brag about SW, always consistent always on time just enough perks and always flew business select just so I can select my seat. I’m a guy who qualifies for the highest tier with AA, the second highest tier with Delta, the third highest tier with Alaskan, and still the highest here with SW and they’re about to lose me as a customer other than I absolutely have to fly them for convenience. I’m sure I’m not alone when I say how stupid they are!! But hey good luck to them as they’ll go the way of TWA in Pan Am. It’s a shame but I don’t give them two years and they’re gone RIP SW!!
We are a family of four and always flew Southwest because of free bags and no change fees. Without those, there will be no reason to use them. We will shop around and fly less, rely on driving more. They are going lose a lot of families with children who buy multiple tickets. I am afraid those here saying that SW will be bankrupt and gone within a few years are right. What a shame!
Whatever, just one more reason to hate everything when I read my email this morning. Southwest used to be my favorite and now I’ll never fly with them again, not that they care.