Southwest Airlines has slashed their profit forecast by a billion dollars as they’ve rolled out checked bag fees and start charging for seat assignments.
Of course the airline says checked bag fees are working out great! Of course they say what they’re currently doing makes sense. But they’re misrepresenting the $1 billion in fees they’re projecting as profit.
- Southwest fares used to be regularly higher than competitors, bundling checked bags into the fare.
- Now they’re selling about 5% of their tickets on Expedia, and listing fares in places like Google Flights, and making their fares more competitive (lower).
- Plus they’re burning the brand loyalty that had customers choosing them by default, or choosing them because of the bundled value that included bag fees and greater flexibility (like travel credits that didn’t expire).
Southwest itself said that moving to checked bags could generate $1.5 billion in revenue – but would cost them $1.8 billion in the process. Plus it means more bags carried onto the aircraft, more bags forcibly taken from passengers to gate check (when overhead bins are full) and longer boarding times. That leads to a less efficient operation.
Now we see how paid seat assignments are working out for the airline, which they’re selling now for flights starting January 27, 2026. They don’t seem to have figured out the revenue-maximizing formula yet. And we see stupid seat maps like this one for a one hour flight:
For a one hour flight you don’t actually want to sell extra legroom middle seats for $60 because you may not sell them out. You probably generate more total revenue at $35 because people will buy those seats and you don’t wind up filling them with passengers who haven’t paid. I often see American Airlines offer first class buy ups for less than this on 1-2 hour flights.
Ironically this pricing is really good for Southwest’s A List elite members! They get to book extra legroom seats for free within 48 hours of departure, if those are still available. And there will be plenty available at these prices.
Incidentally, Southwest is starting this all of with a clean sheet of paper – and didn’t build a priority order process for these seats. So it’ll be catch as catch can, whomever grabs them first. And they’ll likely be gone within 48 hours as well, so last minute full fare buying higher tier elites won’t have access to the seats… and will have another reason to consider a different airline.
Part of the genius of the old open seating model was that last minute elite and full fare buying customers, and those switching flights at the last minute including due to cancellation, could still get a good seat. They weren’t gone before boarding had commenced! And that’s an advantage they’re giving up here.
Brian Sumers reminded after Southwest’s earnings call last week that two months ago United CEO Scott Kirby summed up the mess the carrier is making of its business:
We’re pretty good at being a full-service airline. They’re not. Southwest had the best business model in the history of aviation, and they’re awesome at the point-to-point. But they’re the fourth-best large legacy airline. And the more they look like us, the better it is for us.
Why are you going to choose Southwest over United at Denver or Chicago or in Houston now? And at these prices? United has seat back entertaiment screens and they’re putting in Starlink internet, the fastest in the sky with almost no latency. They have lounges and first class, not just extra legroom seating. They have seat power on most of their fleet (and not just USB). They have buy on board food for sale, including hot items.
In the past you’d choose Southwest for free checked bags, no seat fees, and flight credits that don’t expire. Southwest has voluntarily ceded its advantages, and undercut its brand in the process. They are no longer differentiating their product. They’re replacing it with something that is worse. And they’re not as good at delivering it as competitors are.
Southwest needed to make changes. They needed to diversify their fleet and add airline partners. They needed premium products, but extra legroom alone is not a premium product – they’ll sell you a seat assignment, but won’t sell you even the ability to block the seat next to you. They just aren’t very good at this.
John I
you do realize that Boeing has given WN massive discounts for decades to keep WN from ordering airplanes from anyone else and yet it is Boeing that hasn’t delivered the MAX 7 for the better part of a decade? It is WN that is paying the price for being loyal to Boeing.
and WN’s stockholders lost huge amounts of value before WN announced its turnaround plan which was at least partly pushed forward by Elliott.
and since WN employees have long had profit sharing, WN’s financial downfall that took place long before Elliott came on the scene is what has hurt WN’s employees who have demonstrated a pretty high degree of resilience (so far) to the changes that are being forced on them.
It is the status quo that is the loser in WN’s transformation. The jury is still out on what will work but the parties you mentioned already were losers before Elliott ever came on the scene; it is precisely because so many parties lost that Elliott had reason to show up
Gary, Gary. I think your the one that’s not to savvy. Since assigned seats don’t start till january(6 months from now) why would you put a lower price out now. If nobody bites in a month, they lower it. Pretty simple. If it gets closer to the departure date and your inventory is still big, discount it more. Apparently you have it out for Aa and Wn and just try to stir the pot with your idiocy
I have to agree with everything that has be said. Up until these crazy changes, we automatically went to their website and booked flights. Now the first thing I do now is check everyone. And surprisingly you can see lower fares on other airlines to the same destinations. Stupid Southwest.
>the only winners will be a handful of investors
I doubt there will be any winners from this stupidity.
The existence of a problem does not imply the existence of a viable solution.
@Erect: Talk to MikeHunt. FlyerTalk is where bloggers and AI engines get a lot of their content, and where travelers go to get accurate answers.
You look and AA will offer a cash upgrade for a DCA/MIA flight to first for over $1K. Presumably like the $60 middle seat there are few very takers. Although for an extra $6 on Southwest you’d get an aisle or window.
Then over time that cash upgrade comes down to something more reasonable and likely to be purchased. Are there people out there actually paying over $1K to upgrade on a three hour flight to get a five dollar 7/11 meal? Maybe. Are there people that will pay the $60 for a middle seat for a one hour flight? Maybe. Not very money wise people I’d say.
The point is that airline pricing is run by algos and increasing AI and not human or common sense logic.
Southwest A List Preferred members get access to any seat – including extra leg room at the time of booking. Article states within 48 hours of flight, which is incorrect (unless someone is a slightly lower level regular A-List member)
What @Mike Hunt said to @Erect:
“Third, praising hedge fund and private equity guys as if they’re omniscient is laughable. These are the same folks behind disasters like Toys R Us and WeWork. Extracting value for investors doesn’t mean creating good customer experiences or smart airline strategy.”
SCHOOLED!
@Gentleman Jack Darby – It does not take much effort to school @Erect. Not the brightest bulb in the box by a long shot, but what more can you expect from a CCP shill?
@ Mike — What’s with all the CCP comments? Do you really think this guy is a Chinese bot or do you just like to call him a commie due to his positions? You BOTH seemed to have appeared here recently, around the same time. I am more inclined to believe that you are the same person.
@Gene – Not your best work. No, we are most certainly not the same person, and I’ve actually been here for quite a while. Just started becoming more active with posting lately. I simply enjoy toying with @Erect because he is a loser who has recently promoted the CCP on this blog, in case you missed it.
Now, how do we know you are not the same person as @1990? Seems like your names come up an awful lot in the same comment sections, after all.
*Gasp* What if @Tim Dunn and @MaxPower have been the same person and going back and forth with themselves the whole time all these years?
@L737 – Even better, what if the entire comment section of this blog is only really two people with a bunch of user names? Oh and Gene. He writes like a retiree, so I’m guessing he’s real.
@Gene, @Mike Hunt, @L737 — I do enjoy all these theories. Like, please don’t stop. I’d like to think we’re all ‘real’ here, though, I notice some share more ‘personal’ and ‘real life’ experiences than others.
@Mike Hunt — No disrespect, but I gotta ask again, the name does remind me a bit of the Bart Simpson prank call to Moe’s Tavern (like, Mike Rotch, Hugh Jazz, Ivana Tinkle, Yuri Nator, etc.) Are you doing a bit?
MaxPower’s most recent comment to Tim was on the ‘Years of Sacrifice, And This Is Their Best?’ post, so I asked him/them there. @L737, maybe you’re onto somethin’!
@1990 – Look, I’ll never say whether Mike Hunt is my real name or just the longest-running prank on this blog. Some mysteries deserve privacy. Just know that every time I say the name out loud in a meeting, someone somewhere gets wet. And if you really want a closer look at Mike Hunt, I politely suggest you buy me dinner first.
@Mike Hunt — Thank you. I suspected as much, and it’s indeed a ‘good one.’ I also respect and appreciate relative anonymity online. It’s nice to be able to share and learn from others without it impacting our actual day-to-day. Anyway, “cleanup on aisle 3!”
@L737
I’m flattered (hmmm. Am I? I’m sure Tim Dunn is ferociously typing a 1,000 word response — or asking ChatGPT to do it — about why I’m such a huge hypocrite to not be flattered by a comparison to his holiness, Tim Dunn…), but my premium subscription level is nowhere near that of Tim’s ChatGPT account so I’m unable to match him 8-paragraph response to 8-paragraph response in a matter of 2 minutes.
@Mike Hunt — So really it’s all just me and “Eugene”?
@MaxPower @1990 Hmmm cases dismissed (without prejudice)
@L737 — Not to nitpick, but did you mean ‘with prejudice,’ as in, we’re in the clear, case closed; or, did you actually mean ‘without prejudice,’ as in, you’ll possibly file against us at a later date? It’s a little confusing. *dundun* (law and order theme)
Headed for a merger or sold off in parts. Want to charge Neiman Marcus fares for Target merchandise. No F class, no meals for purchase, no seat back entertainment. I’m burnin gthrough my SWA points and downgrading my card to the lowest level just to keep one free bag check.
@1990 — Definitely without prejudice, can’t let everyone off the hook that easy!
I hope I haven’t exposed my secret love for Tim Dunn in my note saying he’s ok with child abusers
So long as they work for delta
It seemed obvious but…
I wouldn’t anyone to think we’re the same 😉
I’m not ok with any child abusers, regardless of fortune 100 status and I’m not afraid to say it unlike some. 😉
Tim will spend paragraphs on this, after all…
@L737 — Scene from Wolf of Wall Street: “I’m not leavin’… the show goes on!!”
no, Max, you aren’t even worth 3 sentences
You are sick and don’t even realize it. Your lies and distortions convince no one except yourself.