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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 hom*ogenized 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?
