Southwest Airlines is the only one of the largest U.S. commercial airlines that does not charge for customers to check bags, meaning the company is missing out on this multibillion-dollar revenue stream. While Southwest CEO Gary Kelly acknowledges the need to bring in more money for his business, he says his company has no plans to lose its “bags fly free” identity.
“We have a unique and beloved position in the industry with this approach,” Kelly explained about the lack of a mandatory checked-bag fee during a recent quarterly earnings call, “and we would be foolish to squander it, so no thought whatsoever on charging bags.”
Some Southwest investors are pressuring the company to ditch its longstanding no-fee position, especially as its most recent quarterly net income came up nearly $200 million short of the same quarter last year.
Kelly blamed some of this most recent financial trouble on the massive network-wide outage that grounded much of the airline in July.
He also explained that because of the current competition on some ticket prices, Southwest hasn’t been able to increase its airfares to recover lost revenue.
“The fare environment is very competitive and we have seen an increase in competitor seats in our markets that is fairly significant year-over-year,” he explained.
The CEO, who has also been under pressure from the airline’s unions to resign, claims he does have a plan to bring in more revenue, but that he won’t tip his hand at this point, calling the plans “not ready for prime time.”
“I’d rather not share with our competitors where we see opportunities,” said Kelly.
Southwest Airlines to stay an outlier on baggage fees [Seeking Alpha]
Southwest Airlines seeks more revenue, but rules out bag fees [L.A. Times]
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