I think it's important to consider the relationships between the moving pieces here.Shirley wrote: ↑Thu Aug 22, 2024 7:34 pm I'll go out on a limb, and when it comes to customer opinion, take the under.
Southwest Airlines asks customers about ditching free-bag policy
From Seeking Alpha:
Southwest Airlines (NYSE:LUV) is mulling whether to start charging for checked bags, reversing a policy that distinguished the Dallas-based carrier from rivals.
The carrier is polling customers for feedback on potential changes to its policies including bag charges, along with travel habits, booking preferences, and loyalty status benefits, Bloomberg reported.
“There’s no work currently underway to change our industry-leading two bags fly free policy,” the company said in a statement to Bloomberg, “but it’s important for us to know what customers want,” it added.
Southwest (LUV) is currently the only major U.S. carrier that does not charge for two checked bags. The benefit has distinguished the company from competitors who charge $35 to $60 for the first checked bag, with certain exceptions, like using an airline-branded credit card for the airfare. The world’s largest carriers made $33B in checked baggage fees in 2023, up 15% year-over-year.
Southwest (LUV) might be encouraged to end its “Bags Fly Free” perk and take a piece of the multi-billion-dollar bag fee windfall amid pressure from Elliott Management which recently acquired a substantial stake in the carrier. The activist investor has been pushing for changes in management, as well as modifications to Southwest’s operational policies to lure in travelers, increase efficiency, and raise revenues.
Last month, Southwest changed its free-for-all-seating procedures, added a new premium class, and began offering red-eye flights.
In addition to simply being an attractive (and, today, differentiating) economic offering, there is a functional purpose to bags fly free - it encourages people to check bags, which is pretty important to keep things moving during the boarding process.
However, some things have changed, notably (1) Boeing's interior re/design in -800s (started rolling out about 10 years ago) and MAX8s (within the last few years), which offer significantly greater overhead bin space, and (2) SWA's announced rollout of assigned seating (which will, among other things, lead to zone-staggered boarding and possibly even assigned bin space).
Taken together, those items significantly lessen the logistical need to push customers to check bags, in order to preserve the customer experience.
And so, when the company has less of a disincentive to customers carrying-on, then the risks to the company of charging for a second (that's where it'll start) checked bag are fewer.
Which isn't to say it's without risk - far from it. SWA's value proposition - and to be clear the fares are now market - relies now on a few pillars (being free checked bags, ease of booking/changing/cancelling, excellent loyalty benefits for specific use cases and the breadth and decentralized nature of the route map).
Any time you talk about pulling one pillar, you certainly risk toppling the whole thing over.
