Dallas – Southwest’s iconic blue, red and yellow planes may be recognised in the sky after recent moves, but beneath it operates like a competition in the sky.
Only time can tell if it’s a good or a bad thing.
On March 11, the Dallas-based carrier announced that it would remove its “bag fly-free” policy. Alongside the other features of the brand, two free check bags have helped Southwest create customer-friendly images for decades. Many of these policies are on the chopping block, so the airline’s offerings are more in line with other carriers.
It is still unclear whether that will serve Southwest’s profits, but it shows how impatient investors, loyal customers, and the harsh real-life demands of their revenues have been handled.
“Time tells us how consumers view a brand because they no longer have a real differentiated product,” said Nick Ewen, editor of Points Guy.
“So, can it maintain a differentiated sense, a je ne sais quoi, an intangible Quoi?”
Years of life
Southwest is preparing many changes that will be implemented in the near future.
Free bags limited to loyalty program members, business choices, branded credit card holders, and other choices.
Allocated seats;
Premium seats;
International partnership with Icelandair.
Flight credits last only for a year.
New “basic” non-refundable non-refundable fares that are not suitable for changes or flight credits.
Reduce royalty point rates for certain fares. and
The first “Redeye” flight.
According to an internal memo from Infright Operations Steve Murtoff’s Vice President Southwest, which was viewed by Dallas Morning News, boarding procedures have been updated and modified bins are on the way (not until 2026) to accommodate carry-on-vehicle jumps.
“The undeniable Southwest Airlines is evolving rapidly,” Martov said in a memo. “We are fighting for the future and need to adapt quickly to promote profitability and encourage customer loyalty.”
The magnitude of the Southwest conversion is enhanced by its speed. The first hint of what came came during the company’s first quarter revenue call in 2024.
At the time, CEO Bob Jordan hinted that the airline was reconsidering the open seating policy. The photographs crystallized over time, although it was not clear.
June brought the start of a public battle with Southwest activist investor Elliott Investment Management, revealing 11% of the company’s stake alongside chewing criticism of Southwest’s management and finances.
By July, the open seat had died. When Elliott put more pressure on him, Southwest tried to fight it. However, despite the airline’s efforts, Elliott reached the ownership threshold to call a meeting in early September.
By the end of the month, Southwest’s board of directors had been remade to Elliot’s preferences, with the airline unveiling a “change plan” detailing the many changes that anger today’s customers.
Jordan denied that the changes were forced by Elliott, claiming that it was “because it is improving financial performance for all shareholders.” However, the influence of investors is difficult to ignore.
In a simplified world, Southwest’s new policies will increase revenue, while other measures such as acquisitions and their first layoffs will reduce costs.
However, the industry is not that simple. For airlines that have always stood out from the crowd, and for that, they have gained loyal support – some believe that these moves risk losing the southwest of what will first help make them the largest airline in domestic passenger volume.
“necessary” or “wrong direction”?
Ewen said Southwest’s task will balance engaging new customers with potentially improving finances and satisfying existing customers.
But the task became more difficult.
Southwest started with Google Flights and joined third-party booking platforms for the first time last year. Analysis from these platforms will ultimately be cited by Jordan as the reason for the “bag-free” after defending in September.
These platforms can be conveniently used to allow customers to compare flights, but they can also attack airlines against each other. Southwest fares bundle everything together, and some packs bundle nothing, so according to Morningstar Industrials equity analyst Nicholas Owens, the company’s prices looked higher in comparison.
It has put the Southwest in a pinch as all airlines are fighting to increase market share, Owens said. Surges in labor costs have put an upward pressure on fares, but factors such as inflation have made certain customers more sensitive to prices.
However, other customers are even more willing to fire because of the growing experience, increasing demand for premium options.
“Without these options that discriminate against prices, Southwest had blunt instruments trying to pick up these small customer segments,” Owens said. “Fitting one size doesn’t work in a louder product market.”
And the Southwest had to pick up more customer segments. In 2018, Southwest led the industry in 20% of the domestic market. That’s now down to 17%, with Delta and the Americans leading.
Meanwhile, Southwest remains profitable, but its pot of money has gradually shrinked over the past three years. Airline stocks have stepped at nearly 50% since reaching nearly $62 after reaching its post-Covid recovery peak in April 2021.
“I think it’s probably not surprising that it was ultimately necessary and perhaps in the long run we made some of these changes,” Owens said.
However, Marbue Brown, author of Blueprint for Customer Outsession for Customer Obsession, is a book that uses the Southwest as a case study of customer experiences and believes that removing precious perks can actually exacerbate economic problems.
“This transformation is going in the wrong direction. It’s my straightforward thought,” he said. “I’m worried that Southwest has lost its anchor. Once they do that, they’ll lose their customers and lose their market share.”
Theseus Airlines
Theseus’ ships ask if the object is the same object if all the components are replaced over time. So, if all of its distinctive features have been replaced, is the southwest still southwest?
In a presentation with JP Morgan Chase last week, Jordan argued that airlines are “more than policy. We are more than a way of portraying aircraft.”
“Southwest is about something very specific,” he says, referring to something like that point-to-point network. “But we also remain the same about intangible assets, the best people in business, the best hospitality in business, and that remains the same.”
Morningstar Owens has largely agreed and dismissed concerns that policy changes will affect Southwest’s unique atmosphere.
“I think the idea that Southwest culture will somehow disappear forever is exaggerated,” he said. “I think they have something like the funniest flight attendant and team spirit you probably won’t find anywhere.”
Analysts said Southwest did a lot of legwork to rebuild the trust by earning more efficiently from Point A to Point B after the 2022 holiday meltdown. Some of that credit belongs to having excellent workers.
“They definitely choose people of a particular personality and offer a certain kind of experience, and to that extent, they probably still have some uniqueness to them,” Brown said.
“But if the policy doesn’t support people, and the whole flyfeel doesn’t work together, you won’t get Herb Kelleher’s Southwest Airline,” he said.
Each change can improve finances in a vacuum and the Southwest can do its best to maintain its quirky culture, but airlines are a complex web of real people and logistics.
Brown pointed out that baggage charges mean more carrying. This means more overhead space available and gate checked bags. This makes boarding more stressful and potentially frustrating.
The best flight attendants can’t see more overhead space or fit a larger backpack into a bagsizer. Over time, its unique vibe begins to fade.
“If you make this tweak here, and then this tweak there, there’s a domino that’s falling,” Brown said.
“When these dominos fall, I think what you’re looking at is that the more they look like other companies, the more successful they might emerge as legal competitors for them.”
