Southwest has announced its biggest change in its 57-year history, but now that it’s changed this last bastion of its legacy, it will have to keep changing its model. Southwest Airlines is dead.
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Southwest Begins Charging, Assigning Seats
This week, Southwest Airlines changed one of its calling cards since its inception – it will begin assigning seats in January of 2025. The carrier began to show signs of changing its longstanding open seating policy. By allowing open seating whereby passengers simply board in a numbered order and sit anywhere they like and including checked bags in the fare, Southwest was able to turn aircraft faster as passengers spent less time looking for overhead bin space.
The expedited boarding process allowed Southwest incredibly short turn around times, putting aircraft back in the quicker. Airplanes only make money when they are flying so this was a key strategy that helped the world’s first low cost carrier get more flights out of the same aircraft, staff, and gates.
As ancillary revenue became the modus operandi in the domestic US market, Southwest began selling early check-in advantages to help jump to the front of the line. A-List, and A-List Preferred elites have preferential boarding options. In recent months, A1-15 boarding positions have been priced as high as $150, far higher than peer carriers charge to secure extra legroom seats like exit rows.
The carrier will begin assigning seats and building a revenue model for preferred seats in the new year.
What It Was, What It Is
Southwest started as a quirky upstart Texas carrier who found themselves not competing against other airlines but against driving. It operated between key markets in the state, Dallas, Houston, and San Antonio. Once known for flight attendants in hot pants and passing out whole bottles of booze to lure business travelers to their aircraft, the 1990s changed the carrier immensely.
As it expanded to markets farther afield, the Southwest Effect would lower prices on all carriers by nearly 25% on average and grow nonstop flight routes from airfields that typically only saw connecting service. It was cheap, too. Sales would often bring short haul flights down to $29, $39, and $49 one-way. Its irreverent approach kept employees happy and loyal, and customers were devoted too.
But the days of yore are long gone. Southwest was once the cheapest carrier is often more expensive than legacy carriers who have looked past Southwest to compete instead with Ultra Low Cost Carriers and introduced Basic Economy fares to stand toe-to-toe. Instead of flying to alternative airports instead of huge hubs, the airline has embraced Houston Bush Intercontinental, Chicago O’Hare, Washinton Reagan National, and Miami.
Its once happy labor groups have taken the carrier to task for new contracts in recent years. A few years ago it added Hawaii, several destinations internationally throughout the Caribbean, and acquired Air Trans Airways, a discount hub and spoke carrier based in Atlanta.
The all-Boeing 737 fleet which kept costs low by utilizing seat commonality has even come up for debate, the company stating it would consider Airbus products given Boeing production delays on new 737-MAX aircraft.
This isn’t the quirky airline it once was, it’s now a behemoth.
Why Southwest Will Have To Keep Changing Into A Legacy Carrier
Southwest has held the crown as the largest domestic carrier in the United States which also makes it one of the largest (and most valuable in the world.) But half a decade ago, the carrier began running out of places to grow. They flew into any airport in the US that could support at least its smallest aircraft, a 737-700 with about 125 passenger capacity. It added Hawaii, perhaps reluctantly after avoiding it for 50 years. While Canada is still left off the route map, there are few places to grow geographically.
The carrier then began expanding its revenue sources, charging more and more for ancillary products. It became so important to secure an early boarding pass that most flyers added it to their checkout process, leaving some customers late into the first half of the boarding process despite paying to get on as soon as possible. As noted before, even early boarding saw rising prices well above what some Southwest roundtrips used to sell for.
But that’s not enough either.
In order to stay competitive, Southwest will have to find more ways to grow the carrier. They can’t do it by airfare, they are already well above the competition. They can’t grow geographically without changing the fleet. Ancillary revenue under its former model hit its limitations both in what it could charge for and how much it could charge. Now it’s time to take something that was a differentiator and amalgamate to the rest of the market.
Without a first class section, there’s just two more areas for Southwest to grow after this: food and drink, and checked luggage. In every other way, the carrier has now become a legacy airline and worse, it’s an expensive one.
The Death Of Southwest Airlines
The heart and soul of Southwest Airlines is dying away. It’s taken the last decade to see it truly turn from the original point-to-point LCC to a huge network carrier. As yet another differentiator dies away, so too does the uniqueness of Southwest that was its advantage. Other carriers in the US have a homogenized fleet (Spirit, Alaska, JetBlue, for example.) Other carriers have made their hay in offering nonstop options from smaller airports.
Some travelers loved avoiding Chicago O’Hare sprawling across five huge terminals in favor for a quick connection in a revived Chicago Midway. But the airline had to compete against flag carriers for business traffic.
With each of these changes Southwest became just like every other carrier. Seating assignments and soon charging for those seats are a significant change to the airline’s model making it nearly indistinguishable from others.
The airline has been incredibly profitable for decades, it won’t go out of business. But it was able to charge higher prices even as other carriers cut theirs because of these inclusions. Passengers are annoyed by the nickel and diming but love a low fare. These unique differences were reasons to choose Southwest, respecting their customer was reason enough. But with the latest cash grab, the last of its soul has been wiped away, and make no mistake, that was the leading reason flyers chose Southwest.
When every carrier is the same (yes, bags still fly free on Southwest – but they won’t forever), there’s only two ways to compete: schedule, and price.
Conclusion
Southwest spent decades building its moat, insulating itself from the competition and standing out. That’s no more and while they won’t go out of business, the Southwest Airlines that sparked a low cost resolution is gone. When consumers realize they have the same experience as on the larger carriers but could do so for a cheaper price flying them instead of Southwest, the company will face its biggest challenge yet.
What do you think?
Southwest will eventually be acquired by United, with JetBlue to be acquired by AA, and DL to acquire Alaska.
WN has one-third my home airport’s market and offers maybe 9 cities nonstop that the legacy 3 don’t fly nonstop (plus MDW, DAL, and HOU as alternatives to the legacy 3 nonstops to those cities). I will now consider a nonstop with a reserved seat with them over a connection on others. Previously, it was never considered by me. Unfortunately, too many of their nonstops would require me to leave on the first plane out or arrivecat my destination close to 10pm—no in between.
Southwest will lose me, after 35+ years, when they implement assigned-paid seating. The cry baby liberals have killed this once great airline with their whining about the boarding and seating policies that made Southwest the once greatest airline in the U.S. Liberals screw up everything they touch.
As a liberal I agree. There are three things I care about:
1. Single-Payer Healthcare
2. Defunding the Police
3. Assigned seats on Southwest.
Biden, Obama, Clinton, and Carter failed us. Harris takes the reins and we get our assigned seats! Can we be compelled to take 22B? YES WE CAN!
They need to go back to hot pants. (On the females only)
Once again, terrible article by Kyle Stewart. I would honestly consider Tim Dunn a more reliable source at this rate, and I do.
1) That’s called marketing. Not everyone paid those low fares.
2) Those airfares of the past does not take into account inflation.
3) As per DoT fare data, the average SWA airfare is below their competitors by and not a tiny margin either. Data doesn’t lie.
4) No proof that those employees are suddenly unhappy.
5) Southwest has long paid their employees better than competitors, this isn’t a new phenomenon. There are many other aspects of a contract not related to pay.
6) Southwest has previously talked about acquiring Airbus planes, but have opted against it. This isn’t the end of the world if they do eventually go for it.
7) The blog post suggests that Hawaii is some desperate last resort, which is ridiculous. The idea that an airline should grow in all directions, all at once instantly, is unrealistic. I mean, it took time for WN to get there in Denver but they got there.
8) Again, this post tells us that somehow Southwest is charging sky high airfares and fees, despite a huge decline in financial performance. This makes no sense.
9) To further elaborate on point 8, that “fact” is asinine is very untrue. Their casm is still lower than the legacies, and again DoT fare data shows them punching below competitors.
10) First class isn’t actually that big of a money maker and for proof you just need to look at the trend in fares. They’ve been cut significantly over the past 2 decades, squeezing out FF upgrades in the process. There’s a reason why these planes are still mostly economy.
11) BoB doesn’t make that much money as a former Alaska Airlines CEO even told us, as it’s more of an opportunityfor the FAs to interact with pax. I’ve seen employees claim that it isn’t profitable at all.
12) Uniqueness? Are you kidding me? This is a for profit business, not a celebrity or comic book character. Airlines largely imitate each other and that’s for a reason – it works. There isn’t much room for innovation or being special in this industry regardless.
13) As Elliott Investment Management and Southwest themselves told us, this “uniqueness” isn’t working for them, it’s not an edge.
14) No proof or even any coherent argument is presented in regards to checked bag fees arriving. They are not coming.
15) Cash grab? BS. If anything it’s the opposite. Many flyers avoid Southwest due to their archaic boarding process. They leave a lot of money on the table too with the lack of extra legroom seating too.
16) As the reputable Brett Snyder of CrankyFlier has told us time and time again, Revenue Management is getting better and better at their jobs. RM are bot going idiotically charge airfares so goddamn high that they end up losing money.
17) Herb Kelleher himself said that businesses should change with the times. Businesses that don’t adapt, die.
I could have written a lot more for this comment too.
Maybe I should start lying to confirm my priors. I would call this confirmation bias, but there was no research taken whatsoever.
Amen.. Thanks for saving me the effort.
Did Kyle miss the part where Southwest said its own research showed 80% of its current customers prefer assigned seats? And 86% of those who make the choice to fly someone else vs Southwest list that as a primary reason?
Assigned seating is the headline her, do you have the data to back up “The expedited boarding process allowed Southwest incredibly short turn around times”? What is the average turnaround time for South West versus RyanAir?
Even Spirit and Frontier are realizing that ferrying former Greyhound passengers from ghetto to ghetto is no longer paying the bills.
Whatever time savings that Southwest hope to gain by the “quick turn” boarding system was quickly consumed by boarding 25 wheelchair scammers per flight. Regular people who don’t actually mind paying a premium for service would avoid Southwest at all costs.
Southwest shut themselves out of the premium market in favor of flying low-rent slugs.
This is now changing.
No it will not kill Southwest Airlines.
Bags FLY FREE will stay.
Since WN changed its Boarding to A/B/C with the addition of BS A1-A15 and Early Bird boarding.
The FAKE pre boarding customers gaming the system and hurting those that actually need it for their own good has Diluted and killed WN top fare bucket year over year since the BS and EB was implemented. On packed flight on WN it’s now not uncommon for them to have 45 to 60 “Pre Boarding customers “ With Zero people in the A1-A15 group. WN did several test most recently for months last year in ATL where they tried out different methods of boarding and telling passengers they can’t save seats for their friends in Group C . But that approach only delayed flights more than helped them try and fix the problem. The only true solution is seat assignments. It works perfectly for Spirit as an example which has the fastest boarding times of a A321 in the entire world. Plus they have 40% more seats including BIg font seats than WN. WN has less gate checked bags 90% of the time than every US airline because of the BAGS FLY FREE.
WN just needs to alter the cheapest Wanna get away fare to only include 2 Free checked Bags and one Small personal carry on item . This would speed up the entire boarding process and reduce its turn time and increase its margins . They also need to eliminate the free Same Day Stand BY on any flight for the cheapest Wanna get away fare. This also dilutes the High fare buckets because nobody that stupid to Buy the higher fare if the cheapest fare has the same flexibility. WN basically sank its own revenue stream with that idiotic implementation . So if people really want an extra carry on bag or want the. same day standby flexibly WN can sell the upgrade to Wanna Get Away Plus .
Going to this new system WN “LUV even more leg room. Seating” replaces the BS A1-15 will give them a better product to out perform everyone else in the US industry that offer them same services. The seat Assignments And cabin layout change is almost cost neutral for Southwest to implement since you’re not adding any big fancy new over the top seats. WN fixed cost are still cheaper than American united, Delta And JetBlue so they can offer this new service at a lower price point and still make a profit on the service. If they don’t nickel and dime the seating map, like everyone else does, including the ultra cost carriers, WN can win everybody to their product because now those need to travel together we have the option to select their seats together when booking with the exception of the cheapest tickets on the want to get away fair bucket They’re smart enough to do that. Southwest is finally making some really smart choices with us versus just trying to keep doing what worked and 1970 and 2024 and losing a boatload of money. Herb Kelliher Southwest founder and Maverick. CO always said if you don’t evolve you die.. And he always said if you sit on your laurels long enough, the only thing you’re gonna get is a stick in your backside. I don’t think your assessment, but this will kill Southwest is factually correct it’s just headlines grabbing.
They said their surveys showed 80% of customers and 86% of potential customers prefer an assigned seat.
Instead of changing the entire process, why not make a section of the aircraft (the extra legroom one for example) assigned seating with one color seats. Make the rest open seating in an other color.
To handle the full flight but not all assigned seats purchased…
Assign those during checkin or at the gate like other airlines.