DALLAS – Southwest Airlines is studying changes to its quirky boarding and seating policies as it searches for ways to raise more revenue.
Airline officials say they are studying possible changes but won't have anything to announce until September. That tease is leading to speculation about whether Southwest might ditch some longstanding traditions, including the practice of passengers picking their own seats only after they board a plane.
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CEO Robert Jordan says he is proud of Southwest's “product,” but it was developed when flights weren't as full as they are today, and customers' preferences change over time, prompting the “deep dive” into “transformational options” in boarding and seating.
“Early indications, both for our customers and for Southwest, look pretty darn interesting,” he told analysts and reporters Thursday.
Every other major U.S. airline sells first- or business-class seats with more room and amenities. They assign seats long before passengers arrive at the airport. And increasingly, they charge extra if economy-class passengers want to pick a particular seat, such as one in an exit row or near the front of the cabin.
Those policies generate significant “ancillary revenue.” Delta Air Lines took in $4.4 billion in “premium products” during the first quarter.
Southwest doesn’t have a first-class cabin or assigned seats. Passengers line up in the gate area in an order determined partly by who checked in first and – increasingly – who paid extra to move up in line. The lucky or high-paying ones get in the “A” boarding group, followed by the middling “B” crowd and finally the dreaded “C” group, whose unfortunate inhabitants usually wind up in a middle seat, maybe in the back of the plane.
Over the years, Southwest customers learned to check in online exactly 24 hours before departure to get the best shot at grabbing the seat they wanted. In 2009, the airline began charging an extra fee — called EarlyBird — to move up in the boarding line. The fee starts at $15 per flight but goes up when planes are full.
Jordan said any changes must generate significant new revenue and can't slow down flights. Beyond that, he was deliberately and repeatedly vague, but executives did indicate that two possible changes have been ruled out already.
Ryan Green, Southwest's chief commercial officer, said the airline won't impose baggage charges — it's the only U.S. carrier that lets passenger check one or two bags for free. He said Southwest also won't install curtains like those that separate premium cabins from the economy-class section on other airlines.
Savanthi Syth, an airlines analyst with Raymond James Financial, said the lack of assigned seating is “a huge pain point for passengers," although a shrinking contingent still likes it. Syth thinks passengers would prefer the ability to select a seat in advance to trying to get a better spot in the boarding line.
“More importantly, I think it opens you up to a greater pool of passengers that would not consider (Southwest) because of the stress of the current process,” she said. “This is particularly important now that Southwest has lost the differentiation of no change or cancellations fees.” Southwest's closest rivals dropped change fees too during the pandemic.
Syth is less convinced that Southwest needs a first-class cabin, but she thinks adding extra-legroom seats could be attractive. “There are plenty of tall people who could use the extra space,” she said.
Southwest executives are frequently asked about changes in their policies around baggage, seating and first-class cabins. At an industry conference in November, Jordan said there was nothing in the works.
What changed?
Southwest's financial results have become more dismal. The company reported Thursday that it lost $231 million in the first quarter, which was worse than analysts expected and a wider loss than a year ago.
The Dallas-based airline faces sharply rising labor costs — up 19% or $462 million from a year ago, and that was before flight attendants ratified a new contract with sharply higher wages. Spending on maintenance and airport fees are rising by double-digit percentages. And Southwest can't add as many flights as it would like because a production crisis at Boeing means there are fewer new planes.
The company is freezing hiring other than critical positions, and it will take the rare step of pulling out of four airports in August to cut costs. Even with revenue rising on strong travel demand, the airline needs more to offset inflation.
The airline promises that whatever it decides, it won't change Southwest's unique character. That could be a tricky balancing act in the view of its many loyal customers. They must wait out the next several months.
“We are committed to a set of new strategic initiatives. I have hinted at boarding and seating and the cabin, and we’re going to share those with you at investor day” in September, Jordan told analysts.