Some of Southwest's "Bags Fly Free" advertising.

Some of Southwest's "Bags Fly Free" advertising.

If you are an airline geek or have a TV you probably have a good idea that bags fly free with Southwest Airlines. As airline after airline started to charge for bags, Southwest stuck to their guns with no fees. More recently they have started a large advertising campaign hoping that passengers are angry at the fees and will change airlines.

Although personally I do not like paying bag fees, I understand them; weight costs money. The heavier the plane, the most it costs to fly and for now, fees are generating a lot of money for airlines. Passengers will complain about them, but are they changing airlines?

Southwest is making the bet that additional fees will not work in the long run and they will make more revenue earning more passengers than they are losing by not charging bag fees.  It is a big bet, but if they lose, Southwest can always start charging bag fees.

In May 2010 Southwest completed a survey of 3900 business and leisure passengers where they could pick from 55 choices what aspect is most important to them when choosing an airline.  Here are the top five “needs” for business travelers:

1. Has good safety record
2. Offers non-stop flights where I want to go
3. Has convenient flight times
4. Provides good value
5. Does not charge fees

And the top five for leisure travelers:

1) Has good safety record
2) Provides good value
3) Does not charge fees
4) Offers non-stop flights where I want to go
5) Has sales on fares

The fact that charging fees made it on the top five for business travelers is surprising to me. Most business travelers do not have to worry about the fees, since their company will pick up the charges. However, Southwest stated that even though business travelers don’t have to pay, some will have to process an expense report and explain why the additional charges are on the trip. That is annoying and takes time.

Southwest’s next step is to advertise they do not have ticket-change fees either. This won’t be as easy to get across to customers as the no bag fees. It is more obvious for a passenger to know if they have to pay for a bag. It is more difficult for passengers to know if something will come up and they will need to change their flight. Southwest feels confident they can get the message across with a series of new creative ads.

Gary Kelly, Southwest’s CEO and President, wondered out loud at their recent Media Day event, why airlines would do something passengers hate. He stated that Southwest feels lucky that almost every other airline is charging for bags and they are not.

We won’t know how successful no fees will be, but so far Southwest is reporting both growth in leisure and business travelers. I have previously stated it is not an airline’s fault for charging fees… passengers choose to pay them. If passengers are willing to pay fees, airlines will continue to charge them. If passengers rebel against the fees and choose airlines that do not charge them, you will see fees start to go away (although ticket prices will most likely go up). It is a great experiment and I think so far it is working well for Southwest.

Image by Paul Thompson with Southwest Airlines

EDITOR-IN-CHIEF & FOUNDER - SEATTLE, WA. David has written, consulted, and presented on multiple topics relating to airlines and travel since 2008. He has been quoted and written for a number of news organizations, including BBC, CNN, NBC News, Bloomberg, and others. He is passionate about sharing the complexities, the benefits, and the fun stuff of the airline business. Email me: [email protected]

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9 Comments

Gary Kelly, Southwest’s CEO and President, wondered out loud at their recent Media Day event, why airlines would do something passengers hate.

I figured if any airline executive states why, it could start some kind of war that: a) no one will win, and b) just create more negativity than there already is. At least that’s one thing everyone can essentially agree on.

Jon Norris

Paying bag-fees on US domestic routes is a pain in the ‘derriere’ for business pax as well as for other pax. Even if the fee is ultimately paid for by the company it has to be paid for during the trip and requires me to make a claim on return to base. It cannot be included upfront in the other travel costs which are paid directly by my company.

I hate paying for checked in bags. But when I travel with my wife and both of my daughters, I have too. I can’t be lugging around four carry-on’s, plus two side bags, and a diaper bag. It actually makes me upset that I have to pay, but because of previous bad experience with Southwest Airlines, I refuse to fly with them.

Well, I think this is part of the bet. Hoping that you might get so fed up with paying for bags you might be willing to give SWA a second chance.

David

I think that, while airlines care about keeping customers happy, they (obviously) care more about staying in business. Southwest turns a small profit just about every quarter, this year they have made $218 million, whereas United (not including Continental) has made $729 million. Obviously profit speaks volumes, and while Southwest may think they will get more passengers/revenue by not charging bag fees, clearly it isn’t enough to get the profit bag fees bring in (ancillary revenue, which is where bag fees are recorded, is around $750 million so far this year).

Hey KZ!

Even Southwest admits this experiment isn’t over. They feel they won’t see the full benefit for quite sometime yet.

David

also those new earnings based on fees are basically one or two years old. very short-term gains, and at what cost? I for one don’t ever want to fly United again, and I doubt the merger with Continental will do much to improve their stuffy attitude that has only been compounded by more fees.

it remains to be seen where this is going. I’m not so sure passengers have essentially adjusted in a microeconomics, long-term way. a lot of people stick with airlines because they’re already part of the frequent flyer program, or have miles they want to use up, etc. eventually though, people find their way to the best value that suits their needs/wants. my bet is eventually the no fees on bags campaign works for SWA for the bulk of travelers who don’t care so much about frills, and certainly have noticed a deterioration in the quality of service on all the legacy carriers.

I must admit I have always liked Southwest, and haven’t really ever had a bad experience. not sure why people complain about the cattle call seating, except for frequent business travelers.

SWA spent 100’s of millions of dollars on “bags fly free” campaign. Who do you think paid for all this advertising????? You people that dumb? Do you really think bags fly for free?
Get a clue! Nothing is free as the old saying goes.

Madelyn

I’m researching the Bags Fly Free campaign for a project in my Business 101 class. I’m curious: how is that SWA did the market research survey in May 2010, but they began the Bags Fly Free advertising blitz (increasing their ad budget by 20%) in the first six months of 2009?

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