“This seems to be an unnecessary, counterintuitive, self-inflicted wound.”
T
he U.S. airline industry is an unforgiving, cynical business where success tends to be fragile and short-lived. Unless—until recently—you were Southwest Airlines.
The brand that started flying as a tiny intrastate airline in Texas in 1971 tended to buck industry trends for decades, with consistent profitability, stable workforce relations, and high marks for customer service and operational reliability. It also grew to become the fifth-largest airline in the world in terms of passengers carried.
The Right Place at the Right Time
In its early days, the model was simple: high-frequency flights, typically around an hour, with fares low enough to make flying price-competitive with driving. Aircraft “turned” between flights quickly to keep costs low, and were usually on-time because Southwest avoided the large, congested airports that snarled traffic systemwide at the airlines that served them.
Everything, it seemed, was designed to make the experience uncomplicated, which kept costs low and employees friendly, as they weren’t untangling complex issues like international tickets connecting to other airlines, or whether a simple ticket change would radically alter the fare calculation, resulting in a huge price bump.
Everything was pared-down and easy, from one or two fare types to a standard drinks-and-snacks inflight service, offered from trays, so flight attendants could get everyone their drinks faster on the shorter flights. Even boarding passes for the airline’s open-seating boarding system were reusable plastic.
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That formula worked for a number of reasons, most of which were the result of being in the right place at the right time. Growing an airline in the booming Sunbelt in the 1980s and 1990s was a lucky break. Being profitable with a single aircraft type and happy employees when the major competitors were saddled with aging, diverse aircraft fleets and overburdened employees eager to strike to protect union contracts that dated back to before the government stopped price-fixing the domestic airline industry was good business.
But then the industry got more complex.
Where It All Started Going Wrong
After 9/11, new security requirements were layered in that airlines shouldered much of the cost. One of them was a passenger ID requirement that ultimately eliminated the by-then famous plastic boarding cards. Many other major airlines also reorganized in bankruptcy in the aftermath of 9/11, allowing them to jettison their inefficient, expensive union contracts, allowing them to lower costs and better compete on price. Southwest remains the only of the country’s largest four airlines to have never reorganized in bankruptcy.
Southwest also got more complex to stay competitive. By the early aughts, it was serving most major U.S. cities and started to expand into some of the congested airports long requested by business travelers, like New York LaGuardia and Boston Logan. It also added complexity to its product, introducing new business fares with extra perks, and fees for early boarding and pets (which it didn’t accept at all until 2009).
Then, in 2011, it acquired competitor AirTran Airways, which brought even more slots in congested airports, like Washington Reagan National and a hub operation in Atlanta, putting it up against the mega-hub operated by Delta Air Lines. AirTran also brought Southwest international destinations for the first time, kicking off a modest expansion into Mexico, Central America, and the Caribbean.
For many fliers, there were still drawbacks to flying Southwest. Plenty of them never liked open seating. Others wanted to redeem their miles for international flights or trips to Hawai‘i (which Southwest didn’t serve with its own aircraft until 2019). But the airline continued to attract new fliers with customer-friendly policies. Flight credits were easier to use than on other airlines, and there was a degree of flexibility built into the frequent flier program, which had generous earning and redemption at set point-per-dollar rates.
The airline also trailed competitors in adding products that quickly became standard, like seatback power plugs. Other policies that worked better when Southwest was flying less-full planes over shorter routes started to show their age on a growing network, like the inability to rebook passengers on delayed or canceled flights on other airlines.
In the immediate aftermath of the COVID-19 pandemic, Southwest embarked on a massive route network expansion. Up until that point, adding new cities had been slow, but steady—just one or two per year. In 2021, they announced 17 new destinations. By 2024, they had dropped four of them, blaming aircraft delivery delays from Boeing.
The airline’s operational reliability had also slipped, and virtually shuttered the airline over the 2022 Christmas holiday, in a meltdown so big it has its own Wikipedia page, which resulted in the largest DOT fine ever issued to a U.S. carrier. After initially blaming the FAA for a glitch that delayed its flights long after the rest of the industry had returned to normal, the airline ultimately cited outdated scheduling software as the culprit and pledged to implement updates.
In the background of all this, the airline’s profitability has lagged since the pandemic, depressing stock prices relative to its competitors and attracting the activist investor group Elliott Investment Management to acquire a significant portion of the airline’s stock. The resulting power struggle won six seats on the airline’s board of directors, giving it significant power to change the direction of the company.
And change, it did.
The End of an Era
Last summer, Southwest began doing things it had long said were unlikely. First, it announced it would assign seats. Then came the announcement of layoffs—the airline’s first. And on Tuesday, it became the last major U.S. airline to implement a fee for the first checked bag for most travelers—some 15 years after the practice had become standard. In the same announcement were additional notes that the airline would roll out a basic economy fare, reduce the number of points awarded to frequent fliers on discount fares, and once again expire unused tickets after a year—a practice the airline had discontinued to much fanfare in 2022.
Industry observers didn’t mince words in response to the move.
Henry Harteveldt, founder and president of Atmosphere Research Group, told Fodor’s: “If Southwest announced basic economy without getting rid of free bags I would be cheering. By Southwest’s own acknowledgment, free checked bags are one of the top things people associate with the airline and fly with the airline.”
Brett Snyder, CEO of the travel assistance service Cranky Concierge, was even more succinct on his popular airline industry business blog CrankyFlier, titling a post about the announcement “The Day Southwest Died.”
“Within six months, Southwest has eliminated any positive differentiation that existed between it and the legacy carriers. It has an uphill battle now trying to fight for customers with an unremarkable value proposition,” Snyder told Fodor’s.
“The burden falls on Southwest management now to find a new value proposition that gives it a leg up,” he continued. In his blog post, he outlined how the only things that now set the airline apart from its competitors are things it lacks in comparison: first class, lounges, global partner redemptions, long-haul flights, and access to smaller regional destinations.
Harteveldt was similarly direct in his assessment, “This seems to be an unnecessary, counterintuitive, self-inflicted wound.”
Note: The author was employed by Southwest Airlines from 2008 to 2023.
