Southwest's Stance on Fees Could be Problematic

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There was a very interesting piece in this week’s PlaneBusiness Banter (if you aren’t a subscriber, you should be) on how Southwest is backing itself into a corner with its stance on not charging any fees. It was certainly a thought-provoking piece that hints about problems to come for the airline.

I’ve written about Southwest’s efforts before. While other airlines are racing to add as many fees as they can, Southwest has proudly drawn a line in the sand and said that it won’t be playing this game. But as Holly Hegeman notes in the Banter, this is a dangerous game to play for an airline that needs to increase its revenues.

The only way this bet is going to pay off for Southwest is if they can snare enough passengers away from other airlines who are charging additional fees.

That’s a scary bet. And one that frankly, doesn’t look that good.

As much as people hate fees, it seems that people are starting to accept them as a fact of life. This doesn’t mean that all fees are acceptable, but Southwest probably could get away with some if they ever decided they wanted to. Could they charge for a second bag? How about a fee for booking over the phone? Yeah, they could, but they’ve taken away their flexibility to do that by focusing on not having any fees in all their marketing. It would be a lot harder to institute any new fee now.

As a customer, I love the marketing campaign, and I love what Southwest has done. I’m glad that they’re trying to hard to avoid fees, and it makes for a great experience. But looking at the bottom line, I can see how this could cause problems down the road if they decide to reverse course for any reason.

Tags: Southwest Airlines Co., Fee, Southwest, Games, Marketing Research, Personal Technology, Marketing, Brett Snyder

In addition to writing BNET's travel industry blog, Brett Snyder also pens the award-winning consumer travel blog, Cranky Flier. You can follow him on Twitter under the name crankyflier.

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1

brett snyder

09/26/08 | Report as spam

RE: Southwest's Stance on Fees Could be Problematic

@Antonio - I hope you're right, to be honest. If everyone thinks like you do, then it will end up rewarding Southwest for its efforts to avoid fees. But I don't know that the rest of the flying public will be as forgiving as you. I suppose only time will tell.
2

wanderingaramean.com

09/29/08 | Report as spam

Not a problem at all

Southwest is in the enviable position of being able to raise their fares if they need extra cash. Sure, airlines claim that they can't because other carriers would have to match and that would potentially cause them to lose more money than they gain through the fare hike. But in reality Southwest is in the best position to actually raise their fares and have others go along with it. Since most legacy carriers blame the "Southwest effect" for deflating the fares as it is, they'll certainly be keen to raise them back up if Southwest does too.

Seth.
http://www.wanderingaramean.com
3

brett snyder

09/30/08 | Report as spam

RE: Southwest's Stance on Fees Could be Problematic

@wanderingaram - I agree that Southwest is in the best place to do that, but as other airlines gain more and more revenue outside of their ticket price, they can afford to be more aggressive on that end if need be. We'll see over time if it's a problem or not.
4

Tony Francisco

10/03/08 | Report as spam

RE: Southwest's Stance on Fees Could be Problematic

One thing that is undeniable is that Southwest's operations are better than other airlines and that should help contain costs in the same business environment.