Almost nothing is guaranteed in life. Certainly not climate, electricity, health, tariffs or eggs. But for more than 50 years, American consumers could have Southwest Airlines, allowing them to check the bags for free.
Southwest, based in Dallas, ends the policy in May. Customers are not happy.
“It was the only reason I flew to the southwest,” said Makensey Kaye Alford, a 21 -year -old singer and actress who lives near Birmingham, Alabama.
Alford, who plans to move to New York City at the end of this year, said “definitely” would consider taking another airline now.
Southwest’s friendly policies have survived recessions, oil prices and even Covid-19 Pandemic, winning years of goodwill and loyal monitoring, even as it has grown. No other airline leads more people in the United States than southwest.
Now, the airline with an unparalleled streak of profitability (there was almost never an annual loss) is under pressure to increase the profits as the large competitors exceed the airline. Therefore, it is going back to banish the idea that they would charge customers for the bags, which adds to other business model settings, such as assigned seats that give it more in common with all other airlines.
Errol Joseph, 36, a sales consultant who lives in New York and Dallas, said he would now consider flying in Delta Air Lines if the price is the same as Southwest because his airplanes have backup screens, unlike Southwest. Joseph added that with the change of luggage policy, “there is almost no reason to be loyal.”
The bag policy had existed longer than most women could obtain credit cards on their own without the signing of a man. But those days have ended. No more gifts, America.
Retilities, restaurants and airlines are among companies that have been withdrawing free advantages, from free birthday coffees to free package returns, since the pandemic ended.
More and more, the advantages of the airline are only available for members of the loyalty program or customers who buy a more expensive ticket.
Delta offers free Wi-Fi customers on board, but only for those who have registered in their Skymiles loyalty program. United Airlines is making a similar movement, meanwhile, installing equipment on their aircraft so that customers can soon connect to the Elon Musk Wi-Fi Starlink satellite for free if they are members of the airline Milheageplus program.
Usually, it takes real financial pressure for companies to return to gifts, but it is not preceded. Starbucks, for example, got rid of the surcharges of dairy alternatives to attract customers to try to reverse a sales fall.
Customers in front of investors
Southwest’s decision faces investors against customers.
The activist coverage fund and, as of last year, the great Southwest shareholder Elliott Investment Management has increased the pressure on the airline to increase their profits as rivals such as Delta and United have advanced. Elliott pressed for faster changes in the carrier, which has doubted a lot to change, so it could increase income. The firm last year won five seats in a settlement with Southwest.
In fact, after Southwest announced the turn of the stock market and other changes in policies, their actions increased about 9% this week, while Delta, United and American, each fell more than 11%. The CEO of all carriers expressed concerns about the demand for weaker trips than expected, but the southwest reduced the trend, since it expects the changes to add hundreds of millions of dollars to their final result.
“Shareholders’ activism is restructuring Luv in a company to which we believe that investors will eventually gravitate,” wrote the airline analyst of Seort’s research partners, Dan McKenzie, in a note on Wednesday when his target price increased in Southwest’s shares to $ 39 thanks to policy changes despite “the Backdrop Macro is glum.”
The decision to abandon the two bags to free verification is part of the big change in gain renewal of the airline in which other long -standing offers are throwing such as open seats and single -class cabins for assignments of seats and spaces for the most expensive legs space for the most expensive legs.
It will also start offering a basic economy ticket without flip flops and no flutters. Flight loans will also soon have expiration dates. Last month, Southwest had his first mass dismissal, reducing about 15% of corporate jobs. It has also reduced the non -profitable flight.
Air trips have not stopped in the last half century, and although it remains in many basic principles, it has not done southwest. Little by little he has made changes over the years, beginning to sell things such as shipping early, for example. And with air trips that break new records, the assigned seats are necessary for customers and to facilitate the work of employees, they have argued the southwest executives.
Excavation
Charge for the reviewed bags was something that the southwest leaders said repeatedly that it would cost him more than he could do. (American carriers brought more than $ 7 billion in luggage rates in 2023.)
In a presentation on an investor day last September, Southwest said he would win between $ 1 billion and $ 1.5 billion when charging for the bags, but would lose $ 1.8 billion in market share.
Southwest executives said that has changed.
Hours after giving the news to customers, CEO Bob Jordan said Tuesday at a JPMorgan industry conference that “in contrast to our previous analysis, the real behavior of the client reserve through our new reserve channels as MetaSearch, did not show that we are obtaining the same benefit of our Bundled offer with free bags, which has led us to update the assumptions.”
Jordan added that the carrier has new executives with “direct experience implementation of bags in multiple airlines, and that also helped to validate further the new assumptions.”
Maverick’s airline shift
But thousands joined the Coeur Cre of consumers.
Southwest posted on Instagram on Thursday, two days after his bomb announcement, saying “It is not as if we exchange Luka”, a wink to the impressive February trade of the superstar of the Dallas Mavericks, Luka Doncic, to the Los Angeles Lakers. Until Friday afternoon, the post, which also included information about the change, received more than 14,000 responses, much more than a couple of hundreds of answers that the account usually obtains.
“Taking a screenshot of this, since it will be the miniature for the case study of Harvard Business Review to destroy a brand to an entire company,” said Instagram User Rappid_Expere.
Frances Frei, Technology and Operations Management professor at the Harvard Business School, said that, in fact, no other company is as studied as the southwest.
“I hope this is not a case of activist investors who enter and insist on a set of decisions that will not have to endure,” he said. “Great organizations are built over time. It doesn’t have been ruining an organization for much time, and I don’t really want this to be an example of that. “
Betting to the house
The policy of two Southwest bags does not officially end on May 28, but for now the slogan is still on board, printed on cocktail napkins.
There will be exceptions: customers who have a Southwest Airlines shared brand credit card can get a bag for free, and customers in their best service levels (read: more expensive tickets) or members of their first -level loyalty program will obtain one or two free registered bags.
It remains to be seen if customers leave southwest or are simply reacting to change.
The CEO of Delta, United and Spirit this week said they see the opportunity to earn customers who could move away from the southwest.
However, many travelers will not have many other options, with such consolidation between carriers and strength centers, although they could venture to other airports.
Southwest has a participation of approximately 73% at Baltimore/Washington Thurgood Marshall, a participation of more than 83% at the San Francisco Bay Oakland International Airport and 89% in Long Beach, California, according to the Cirium aviation data firm.
Continuing
The real test, Frei de Harvard said, will be whether the exchange of the bag will slow down the Southwest operation, with more customers who bring hand bags on board to avoid controlled luggage rates.
“I simply fear that the cost is underestimating,” he said. “It is a real operational damage for the southwest if they are slower.”
Southwest is already preparing its employees for an avalanche of customer luggage at the door.
Just after his announcement on Tuesday, Southwest told his employees in a memorandum that customers “will undoubtedly wear more luggage than before.”
Door agents will receive mobile bag printers “reducing the need for rope bag labels” and the company will design new hand -size guides so that customers can see if their luggage adjusts as a continuous continuum, according to a staff memorandum sent by Justin Jones, EVP of Operations, and Adam Dic CNBC.
The airline also plans to accelerate the modifications of its Boeing 737-800 and Max aircraft with larger aerial containers.
Frei said not to charge for bags, unlike Hot Dog Costco $ 1.50, he is not a loss leader, something that a company sells with loss just to win customers who could buy more expensive and profitable items.
As much as customers have loved it, the reviewed bag policy also had an aid to the airline to change the planes faster.
“The reason is not because it is friendlier for customers. It is because it is a quick response airline, ”he said. “If I charge for the bags, it is more likely to wear more luggage on board. And when you wear more luggage on board, I lose my quick response advantage. ”
Southwest is confident that he is prepared for an increase in verified door bags and luggage on board.
“We have a series of work transmissions that are underway with our current operations, so that this does not affect our turn times,” said Operations Director Andrew Watterson in an interview.
Time will tell how it shakes. For now, we have the Hot Dogs of Costco of $ 1.50.
