No-frills Southwest Airlines says it may have to start charging for some frills
Southwest Airlines Co. Chief Executive Officer Gary Kelly piqued investor curiosity recently when he said new ways to generate revenue are “under construction.’’
The discounter barely has a toe in the big pool of money that rivals collect from so-called ancillary fees for, say, food bought on board or preferred seating. And Kelly has ruled out some of the juiciest mainstays at other airlines, such as charges for checked bags, assigned seats and reservation changes.
“That’s not what we do,” he said on an earnings call. Southwest has “better opportunities that fit our brand.’’
Kelly won’t go into specifics just yet, and Southwest declined to provide additional comment. That’s fueling a guessing game on Wall Street about what he has up his sleeve to boost revenue as Southwest grapples with an increase in costs. Here are some likely options:
More perks: While Southwest flies just coach cabins and has no assigned seats, it does have several fare categories, including Business Select, which comes with a free drink, a spot among the first 15 passengers to board and expedited security screening in some locations.
Southwest could provide additional perks at higher prices, said Adam Hackel, an Imperial Capital analyst.
Forward seating: Southwest could also take Business Select a step further — think business-class lite.
Up-selling opportunities: Instead of — or in addition to — adding perks on the high end, Southwest could reduce benefits in cheaper fare categories.