Here are my predictions of five massive changes that are about to hit Southwest Airlines –

 Southwest Airlines is under the gun from Wallstreet investors to improve their financial returns for investors. Since the pandemic the “original” low-cost airline has wallowed around with sloppy financial returns that are 50% of those of Delta, and United Airlines. This caused the vultures of Elliott Management and other hedge funds on Wallstreet to buy large amounts of Southwest Airlines stock and demand higher returns starting by dumping the current Southwest CEO. 

Here is the magic formula that made Southwest the most successful airline since airlines were deregulated in 1978 – 

• Always fly the same type of airplane (Boeing 737)
• Fly point-to-point between secondary airports (Not using the hub and spoke model used by other airlines)
• Offer no-frills flying (no first class, no seat assignments, etc.)
• No fees: (Free checked luggage, Free flight changes)
• Corporate culture of happy customers and happy employees

Here are five big predictions of what Southwest will soon do:

1.Seat assignments here we come – The cattle-car open seating long employed by Southwest was successful as the airline was able to turn around flights (unload and load passengers) almost twice as fast as other airlines. This resulted in one plane being able to fly one additional flight per day compared to other airlines. Keep it simple stupid was the Southwest slogan. The only problem is you can generate more revenue with a seat assignment model.

2. Get out your wallet as Southwest will soon start charging for preferred seat assignments – The next step after offering seat assignments is they will start charging for preferred seating (window seats, aisle seats, etc.) Some people are estimating that by charging for preferred seats Southwest could generate over $1 billion dollars in additional revenue. That is too much money to pass up for something that is optional for customers. 

3. First bag flies FREE – Southwest has made hay singing to the world that “Bags fly FREE”. Many people understand that the total cost of a trip can explode higher when factoring in the bag fees charged by other airlines. This has been a great marketing point that is costing the airline millions of dollars in lost revenue, especially considering that almost every other airline charges for luggage. I think the hedge funds who now own large parts of the company will scream “start charging for checked bags” while the marketing folks at Southwest will argue it is one of the only differentiators they have compared to the other airlines. In the end, I think there will be a stairstep approach announced by Southwest that announces “One bag flies FREE”. Currently, two bags fly free. Charging for the second bag will bring in millions of dollars and still allow the airline to claim fee checked luggage. Warning! If Southwest’s financial results don’t improve shortly the “Bags fly FREE” may be history. 

4. No First class seats, but Premium Economy makes sense – Southwest has historically only offered one level of seating…coach class. But just as the other airlines have figured out people are willing to pay for more legroom, especially business travelers. This is also an easy and profitable step once they more to seat assignments and preferred seating. I really dont see Southwest adding first class seats as they would lose about 10 seats from each plane with only marginal increase in revenue. 

5. Southwest will discontinue “Friends Fly Free” credit card program – One of the best deals in the travel industry is Southwest Airlines’ “Friends fly Free” program. There are three ways to earn the free companion pass. 1) Fly 100 qualifying one-way flights or 2) Earn 135,000 qualifying points in a calendar year or 3) Sign up for a Southwest credit card and spend $4,000 with 90 days and you’ll earn a Companion Pass for the following full calendar year. Millions of people signed up for the credit card program and I think it will have a massive negative impact on the airline’s revenue in 2024. The result is I predict that Southwest will keep the Companion Pass but nix allowing you to simply buy your way into it with a credit card.

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