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 Preferred 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.
@ Gary — WN is clearly aiming for bankruptcy.
Gary,
This pricing model isn’t stupid.
It’s all about network effects.
The airline knows nobody will buy the middle seat at that price. The airline is counting on the middle seat being empty so that the window and aisle seat pax get more comfort and value out of THEIR purchases.
In the long run the airline will more successfully sell 2x seats (window, aisle) instead of 1x seat (middle).
Airlines are much smarter than you give them credit for, and hedge fund/private equity firms driving this change know what they’re doing. They’re experts in the financial bottom line. If you’ve ever met a HF or PE professional you know their intellectual capabilities and entrepreneurial prowess are beyond the imagination of your average 9-to-5 white collar employee.
@Gene — Slight correction. Elliott (mis)Management is aiming for a… bankruptcy, merger, acquisition, sell-off, etc. Whatever maximizes their short-term profit; workers and consumers at Southwest, be damned, except the top executives (they get golden parachutes, teehee).
(Ladies and Gentleman, please stand for Mr. Lee Greenwood…. “And I’m proud to be an Americ…”)
I’m flying in mid-November, DIA to LUV, on a ticket I bought in May and fully expect it to be an infuriating nightmare – and likely the last time I ever fly Southwest. Way to go.
@JuliaZ — It could be worse. DEN has had some issues lately; American had that runway fire on Saturday, and Frontier had to evacuate a plane because of ‘threatening notes’ yesterday. Probably good that we all set low expectations. Or, it’s about a 12-hour drive to Dallas!
Erect gets it.
They will end up giving away those middle seats.
and there is still a preference for sitting up front on every airline. The difference is just that WN doesn’t have a first class cabin.
and don’t forget that UA really does not have a single mainline aircraft with Starlink. B6 and DL are the only two US carriers that have near fleetwide high speed WiFi.
only about half of UA’s domestic narrowbody fleet has seatback AVOD.
What UA has or doesn’t have won’t make or break WN.
And, after the rejection of UA’s FA contract, I’ll take WN employees any day over what we will likely see in hostility from UA employees.
>the more they look like us, the better it is for us (United)
Quoted for truth.
I’m sure that the surveys asking customer if they preferred assigned seats did not ask: “Would you prefer to pay $30 for an assigned seat or to pay $0 for whatever seat is open when you board?”
Southwest’s propaganda that “customers prefer this” is insulting. Everyone wants everything until you tell them it’s not free.
You really should hire a copy editor. I’ve seen so many dumb English errors in your articles. In to-day’s thing about Southwest Airlines you write, “whomever grabs them first….”
Whom is a.direct object relative pronoun in the accusative case.
What is the subject of this clause? “grabs” is the verb, “them” is the direct object pronoun, “first” is an adverb, so that leaves …
“Whoever: is the correct word.
@Tim Dunn & @Erect — On those middle seats, you forget the couples/families want to sit together, so they will likely end up paying for that $60 seat, or they’ll take their chances (like a Basic Economy seating assignment at the gate with the legacy carriers). For loyal Southwest customers, this is going to feel jarring as they’ve been used to passenger-friendly policies for decades.
Also, Tim, eye on the prize, keeping that pressure on UA, even on a SWA post. Such commitment! You’ll probably get @MaxPower back on here, soon enough!
@nsx at FlyerTalk actually gets it.
@Tim Dunn — You mean @Erect knows what’s up* (joke). Suprised you missed this one @1990 heh jk
Even the cheapest seats are expensive. I’ve seen as low as $9 for basic economy seat selection at comparable flight time lengths.
1990
you fly enough that the notion that there are no “free” middle seats in the extra legroom section of any of the big 3 and yet Gary seems unable to make the equivalency between the front rows of WN’s aircraft and the non-first class seats forward of the wing for any of the big 3.
and I am just correcting the notion that UA has a better product at least based on Starlink – that doesn’t yet exist on any UA mainline aircraft – or the prevalence of seatback AVOD.
and employee relations matters a whole lot more than anything onboard on a 1 hour flight; UA FA’s rejection of their contract has the potential to be far more damaging to UA’s premium revenue strategies than any hard product element.
And, as I have said before, UA’s loss could be AA’s gain.
and WN employees consistently deliver better customer service than UA employees do based on actual customer evaluations.
@nsx at FlyerTalk @1990 — FlyerTalk still exists? It used to be full of pompous traveling salespeople (all bluff, no actual intellect). Nobody in respectable careers ever used that site with a single exception: Ben Edelman. Look up that guy – he has a JD and PhD from Harvard. Former Harvard Business School professor. He has previously commented on this very blog. He is definitely the highest IQ person to have ever commented on this blog.
@Derek McGillicuddy — your comment is an outstanding example of why some people are very knowledgable but make horrible teachers. While your underlying knowledge is sound, your pedagogy is beyond unintelligible. Here’s a much simpler way to convey the same language.
To decide “who” vs. “whom,” answer the question posed. If the answer is “he/she,” use “who.” If the answer is “him/her,” use “whom.” To illustrate:
Who likes Southwest? (He/she does.)
To whom does Southwest appeal? (To him, the leisure traveler. Not to her, the business traveler.)
Gary wrote “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.”
That is not necessarily bad. They may earn $1B in profit from $1.5B in baggage fees. If they lose $1.8 in revenue, that might represent $0.2B in profit, if even that much.
Still, I have flown Southwest just to avoid the checked bag fee.
@Erect – Your comment sounds like you got duped into paying $60 for a middle seat and are now trying to justify it.
First, if the goal were to leave the middle seat empty for comfort, Southwest could simply block it, like Delta did during the pandemic. Pricing it absurdly high isn’t a clever strategy. It’s just confusing and off-putting to customers.
Second, this has nothing to do with “network effects.” That term refers to platforms gaining value as more people use them. It has no relevance to charging more for a less desirable seat.
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.
The article makes it clear: this isn’t a masterstroke of pricing. It’s Southwest flailing to squeeze more money out of passengers, even if it means charging extra for a worse seat. Trying to paint this as genius just makes you look foolish. Which, as we already know, you very clearly are.
100% agree with Kirby. What is more annoying is it is really just a tax on families or other groups traveling together. Want three seats together that are not in the last row? Prepare to pay a pretty penny to include that middle seat. GA are going to love all the new conversations and work they will have trying to get people together.
@Gary —> You wrote, “[The old] Southwest fares used to be regularly higher than competitors, bundling checked bags into the fare.” The idea being, once you factored in the checked bag fees and the cost of seats, Southwest would in fact be less expensive than its competitors. This is exactly why I stopped flying SWA. With elite status and/or a co-branded credit card, one doesn’t pay for checked bags anyway, and the only times I haven’t flown in the exit row are times when I’ve been upgraded to Premium Economy or (domestic) First. This has long made other airlines less expensive to fly than Southwest.
Now that Southwest is charging for bags and seats, they are a) like everyone else, and b) there is no reason for me to switch back to them as I don’t pay for bags or seats on other airlines where I have elite status or a co-branded credit card.
There’s still one reason to pick Southwest over United at Houston: if you prefer Hobby to Bush. Of course, there’s also the companion pass, at least until they kill that.
@L737 — Zing! Ah, the student becomes the teacher. *bowing* (not to be confused with… Boeing)
WN is done for .. so sad to see a once great company destroy itself. It will be sold off in parts —
Adam H,
Scott Kirby fails to realize that United was a pretty big failure for much of the 50 years since deregulation.
UA has made a number of very positive improvements but WN has never had employee relations as bad as UA had for decades and is on the verge of seeing again.
Scott Kirby is incapable of seeing the log in his own eye while he tries to point out specks in the eyes of others.
WN is in transition and they have to get it straightened out.
But the entire notion that any of the big 3 – including UA – has middle seats in the extra legroom economy section of the aircraft that are available at no extra charge is patently false.
I think Southwest is testing the waters to see how much they can extort from passengers
Bag fees ,100 seat assignments for a 79 dollar one way ticket etc
Basically become another frontier or easy jet
Charge for beverages etc
In 12 months they will see if their pricing strategy worked or they can merge with frontier or find a buyer when they go belly up
It’s going to be interesting to see if they lose their vip wheel chair pre boarder crowd!
I likely will never be a passenger again holding LT Status @ AA UNITED & Alaska
Yeah, the headline ‘$60 for a middle seat!’ is eye-catching, especially when folks were used to ‘free seating,’ but it’s the $3-6 differential that’s actually telling (middle vs. aisle or window). The $60 part is mostly because of that legroom, as I believe @Tim Dunn is trying to emphasize.
It’s like Costco dropping bulk items and the $5 chicken while dropping the membership fee, blaming “consumer preference.”
The first priority is usually getting the consumer through the friggin’ door. While consolidation has helped…a bit…the better economics with the newer aircrafts mean that there will always be new players competing for domestic share for the foreseeable future. Racing to the bottom/debundling/enshittification has pretty much hit the floor on the low end.
It’s like Costco dropping bulk items and the $5 chicken while dropping the membership fee, blaming “consumer preference.”
The first priority is usually getting the consumer through the friggin’ door. While consolidation has helped…a bit…the better economics with the newer aircrafts mean that there will always be new players competing for domestic share for the foreseeable future. Racing to the bottom/debundling/enshittification has pretty much hit the floor on the lowest end.
As a former Global Services member of United, and lifetime 1K (due to 2 million+ miles flown), I can honestly say, now that I have retired, that I don’t miss flying, and in fact, go out of my way to avoid flying. For 40 years or so, I flew a couple of times a month, often overseas. I’ve flown First Class, Business Class, Premium Economy and Steerage on just about every major carrier in the world. Why anyone flies these days if there are any alternatives is beyond me. I used to fly Southwest on a couple of domestic routes out of Dallas and Seattle, but no more. They just add stress to the whole endeavor, and now they have added cost and more stress. I doubt that I will ever set foot on a Southwest aircraft again.
>I think Southwest is testing the waters to see how much they can extort from passengers
Agreed. Most of Southwest’s existing customers are price-sensitive. We resent this exploitation and have begun checking alternatives.
Tim Dunn is wrong, as usual….as he smugly pulls out his data to tell us why DL’s IT meltdowns aren’t as bad as WN’s…
“He is definitely the highest IQ person to have ever commented on this blog.”
There’s a low bar to conquer.
Just brilliant SW! At one time you were worthy competition now you’re aiming to become Spirit. .
@ Mike P — ROFL
On top of all this, I just canceled my SW credit card I’ve had for over 20 years. They are now just a commodity.
I have the SWA Priority Credit Card. (The one they just increased from $149 to $229 and took away the $75 annual flight credit. i.e. a $155.00 increase in the yearly cost of the card.)
They tell us that we can get an extra legroom seat within 48 hours of departure, when available.
My prediction: 48 hours before, I will have two choices.
#`1 = Stay in my regular seat (with even tighter pitch because they stole 1 or 2 inches to give to extra legroom seats)
— or —
#2 = Free upgrade to extra legroom seat — but I will be in the middle.
Attn Elliott Capital….
How are your ‘Brilliant’ changes working out now? For your next trick…What are you going to do to your other foot?
Picard
@Derek McGillicuddy
“You really should hire a copy editor.” I always assumed Gary purposely added a few mistakes here and there. There’s a segment of the public that likes to read things and correct the grammar to make them feel better. I assumed this was Gary’s service for them.
Herb is gone. The corporate raiders in charge of swa will sell it in pieces like Lorenzo did to eastern. Ill do a 1 hr flight on them but not purchase over a few days in advance.
Gary to be fair we also see this on UA, AA, DL i.e. charging for middle seat assignments at the front of the plane. Admittedly $60 seems a bit absurd for a one hour flight, but that’s not the point. Elliott wants to squeeze as much juice as it can from unsophisticated travelers who will pay anything for a seat assignment because they don’t know any better.
Of course this will eventually backfire, like everything WN has done this year. Just wait for the next earnings report.
This is absurd “on its face”, we’re having to scrape to come up with a theory to support it. Unless it’s a ‘dummy’, a place-holder used before it goes on-line, got posted early. If that isn’t the case, who, in theory, is minding the store at SW? “Airline people” realize it’s laughable. That’s the kindest word they’d use.
“Network effects” lmao. I’m dying. Someone read a Business Insider article about-literally-any-random-thing, put his big boy pants on backwards and showed up in the comment section with his favorite new phrase. Should be charging for this kind of comedy.
Everyone is missing th realty here.
1) SW not going to be giving away middle seats on flights, because they don’t/won’t usually have full planes.
2) The middle seat price gets the near full price from people traveling together who want to both sit up front.
3) If the plane is getting full, middle meats are the only option, so they’ll still get sold. There’s no reason to sell them in advance at a discount.
Short version: They’re not charging $60 for an extra leg room middle seat. They’re charging $126 for two extra leg room seats together.
The main issue isn’t the $60 middle seat, it’s the fact you have to pay at all to reserve any seat.
@ Christopher Raehl — Volume surcharge!
Next up — WN will be require the companion to take the middle seat when using the Companion Pass! That’s actually a brilliant idea that is sure to have network effects…
I’ve sat in an extra legroom seat (row 4 on a retrofitted MAX8). Hard to notice any difference.
Their heart logo really applies now…they love screwing customers. This is one Airline that should slowly circle the drain and simply go away. They deserve it.