The airline announced it’s changing its policy and no longer allowing checked bags for free, among other moves.
A huge part of Southwest Airlines’ marketing strategy was offering free checked bags, to the point where it trademarked the phrase “bags fly free.”
But the airline recently announced it will begin charging for checked bags on May 28. The move also comes on the heels of other big changes, like the elimination of open seating in exchange for paying for assigned and premium seating, moves that will roll out this year.
While it may seem counterintuitive, these changes will help Southwest become more competitive with other airlines as it shifts from a “one-size-fits-all” model to one where people can pay more for an experience that fits their needs, said Ravi Sarathy, professor of international business and strategy at Northeastern University.
“Southwest is becoming more like the other airlines (and) their main competitors: Delta, United and American,” Sarathy said. “There are some segments of the population who don’t mind paying more for comfort and service. … Southwest is competing more like the other airlines now, and we’ll have to see whether overall, it gives them a better result.”
Southwest is “an unusual airline” due to its areas of business, said Sarathy. It primarily offers flights within the United States, helping it stand out from its larger competitors. It has also taken a more “one-size-fits-all” approach to travel with open seating instead of business class options and benefits like free checked bags.
But, Sarathy added, the airline has not performed well lately on the stock market. Southwest also cut 15% of its corporate workforce last month in the first mass layoff in company history.
While paying for checked bags and premium seating might cost customers in the long run, it could help bring in millions for Southwest and keep it competitive with other airlines that offer business class while also continuing to have some of the better options for direct flights in the United States.
“Where are you going to go if you want a direct flight? Southwest is a good option if you want a low fare,” Sarathy said. “By increasing the kind of seats they offer, they may attract some more business class passengers who take last-minute travel and are willing to pay higher prices. I don’t think Southwest generally is seen as business oriented. It’s much more to people who are traveling to see family or vacations, and so this might help them attract more business passengers.”
Part of the decision to eliminate the bag policy came from another new business move. Southwest recently began selling on third-party sites for the first time. From this, CEO Bob Jordan said the airline found that customers were picking tickets based on fare, not perks like free checked bags, hence the decision to change the policy.
As a result, people may be swayed to go with the airline where they can save the most overall versus saving on perks like free bags, creating the need for Southwest to become more competitive.
While it might seem counterintuitive, charging for bags and tiered pricing might pay off for the airline in the long run as checked bag fees bring in millions for other airlines. While Sarathy anticipates there may be some initial blowback to the change, it is likely to blow over.
Additionally, Sarathy said the elimination of open seating in favor of tiered seating might appeal to some customers who are willing to pay more or choose an airline for the ability to sit in business class.
All this could ultimately help the airline lower overall fares in order to stay competitive with other airlines, particularly at a time of economic uncertainty.
“There is a recession coming up, and I think people are becoming somewhat more wary of discretionary expenses,” Sarathy said. “A lot of people are not going to be as willing to take a weekend trip just for fun. People are going to be watching their pennies more. What that means is price is going to become more important, and … people are going to be watching their fare and choosing an airline, not just on loyalty, but also based on price.”