The repeated use of “monetize” and “premium” in its investor presentation last week reveals the heart of Southwest’s strategy to adapt to a changing aviation market. I am of the opinion that the changes strike the right balance and have the potential to be a net positive.
Southwest Airlines Goes All-In On “Monetize” And “Premium”
Kyle argued the “new” Southwest Airlines is unrecognizable from its former self and he makes a compelling point, though I would not go quite that far. Two free checked bags will remain, the familiar fare structure, no change fees, and probably the same folksy service onboard…even in new uniforms.
On the baggage point, Southwest claims it carefully considered its alternatives and found the $1-1.5 billion in ancillary revenue that baggage fees would raise would be more than offset by customers who would book away. I’ll take Sotuhwest’s word for it, but I would then think that might be the case for other carriers too…
At its latest investor presentation last week, Southwest officials returned to two words over and over:
- Premium – 34 times
- Monetize – 11 times
Southwest hopes that by offering a more premium product (extra legroom seats further incentivized by allowing its top-tier A-List elites to secure these seats for no extra charges) will foster loyalty and ancillary revenue. Extra legroom seats is something all US carriers currently offer and does not distinguish Southwest, but it is a market segment Southwest has long neglected and may usher in a whole new of business and premium leisure travelers who were previously unwilling to deal with the “musical chairs” annoyance of open seating.
I’d argue there will still be very little “premium” about Southwest Airlines. Nothing it offers will edge out its competition beyond its schedule in certain markets.
In terms of monetization, it will try to discourage people from booking “Wanna Get Away” fares (the new “basic economy”) by restricting seat assignments to check-in only (and auto-assigned). Wanna middle seat? book a Wanna Get Away fare…
As Dawn Gilbertson of the Wall Street Journal correctly identifies, there are winners and losers in the “new” Southwest”
- Winners
- Southwest frequent flyers – A-List Preferred members can choose extra legroom seats at time of booking and A-List members within 48 hours of travel
- Heavy packers – two free checked bags will remain a Southwest distinctive
- Travelers who hate Southwest today – Most people who refuse to fly Stouhwest say this is because of the lack of assigned seating may give the Dallas-based carrier another look
- Losers
- Travelers who buy cheap tickets – Southwest argues that those who purchase “Wanna Get Away” fares lose nothing because they did not have a pre-assigned seat before and will not have one now..but that’s a bit deceptive. Before, Wanna Get Away travelers could check-in on the dot, get an early boarding number, and secure a prime seat onboard. Now they will be relegated to leftover seats…Wanna Get Away may become Wanna Sit In The Middle?
- Passengers who like open seating – if 80% of Southwest travelers want assigned seating, that means up to 20% prefer open seating. They will lose out on “the thrill of the hunt.”
- Cheaters + Losers – Losers lose. Those who feign a disability in order to pre-board will find there is no longer an advantage to do so. I’d expect wheelchair assistants will suddenly have a lot more time on their hands. Yay! Also, the idiots who put coats or bags down to try to “reserve” seats onboard will no longer be able to play this game.
CONCLUSION
I am cautiously optimistic about these changes striking the right balance between making the necessary innovation that customers demand and not throwing out the entire business model (free checked bags) that has worked for decades. I’m not sure this will be enough to pacify activist investors, but it marks a fair start. In any case, we can certainly see that “monetize” and “premium” are at the forefront of Southwest’s evolution.
Via assigned seating, hope this cuts down on the Southwest “Jesus Jetway” crowd which was getting way out of hand.
Just flew Icelandair and Delta, and none of this nonsense.
A primarily domestic carrier that serves a few trashy near international resorts with all economy seating and a revenue based FF program, no lounges, and no meaningful partners doesn’t seem premium to me. But there are some people who think the Club at JAX is premium, so I suppose it’s to each their own.
Well, Jerry- the word “premium” (and “luxury” suffers from this also) has been morphed into a nonsense advertising buzzword. When I see something advertised as “premium ” I know it will be anything but.
Frankly, SW is just typical for the garbage US airlines. Nobody in their right mind would call any US airlines premium, you have to go to international carriers to come close to a true premium experience. Or fly private.
So your choices otherwise are….. The airline with ancient planes and a version of premium that’s lipstick on a pig, the one with planes held together by duct tape, or the one with food you can’t feed pets. And that’s not counting the minor airlines only good for “Florida people”
With that competition, there’s not much point. SW still comes in near the top choices for domestic transport. Which ain’t saying much.
Southwest has nothing “premium” to monetize. It is the airline that flies middle market company salary people at best and the rest is the flip flop brigade, which in the UK is known as bucket and spade.
That is the sad state of US airlines! A garbage experience that gets you from point a to point b. Too bad there is no premium US airline. Just a competition on who is slightly less garbage -ey.
When flying coach, doesn’t matter who you choose. Direct flight wins over “brand” any day. US airlines are so close in their mediocrity it doesn’t matter. “First Class” domestic is a joke; but if I need the space I’ll just buy it and fly whatever is convenient.
How DARE Southwest use the PREMIUM tagline that is UNIVERSALLY recognized as a DELTA trademark! I hope my daddy sues them into bankruptcy!
Southwest is sinking fast. Time to bring back the Go Go boots and free bottles of booze! Make Southwest Great Again!
I have learned not to be truly optimistic when it comes to airline promises, but I am at least hopeful that these changes will help me out. From my home base, many routes are dominated by Southwest.
Matthew often points out that Southwest isn’t cheaper than other carriers, but on my common routes it usually is markedly cheaper. I priced out a domestic RT yesterday that was $500 on southwest and $1000 on American. I’d much rather do American with the E175 and lounge access, but I guess so would everyone else, thus the $500 price difference.
Assigned seating and more legroom accomplishes a lot of what I’d like from Southwest. As for lounges, I love lounges, but I suspect if Southwest ran a lounge it might not be the kind of place I’d want to go anyway.
should have kept a premium cabin when they bought Air Tran
Glad they bought Air Tran not UA as they would have gutted UA entirely
My main issue is that as frequent biz traveler, as A-list I can change for free on the day of departure and still board in front of the B group. With assigned seating that very likely means changing a flight gets you a middle seat. Many biz travelers will not be happy with the reduced flexibility.