Southwest: We’re low-cost, not no-frills

Delta has sold basic economy fares since 2012. United and American each will phase in the no-frills offering in this spring. But Southwest has no interest in joining the pack, CEO Gary Kelly said Thursday.

“Every other competitor, they lavish attention on elite customers and they ignore the rest and that is our biggest opportunity because we don’t ignore anybody,” he explained during carrier’s fourth-quarter earnings call on Thursday.

Unlike its legacy airline competitors, which are steadily offering more diverse and stratified product offerings, Southwest has continued to fly a fleet of entirely one-class aircraft. They also distinguish themselves from their domestic rivals by not charging fees for the first two checked bags and not charging change fees.

Kelly said that if it were to offer bare-bones fares, Southwest would have to do what United, Delta and American have done, which is charge for bags, disallow itinerary changes and have the low-end ticket holders board the flight last.

“Now that would complicate the message after 45 years of building the brand, and I think that would be a huge mistake,” he said.

Kelly made his remarks as Southwest reported record net income of $2.24 billion in 2016, besting 2015 by 2.9%.

In the fourth quarter, Southwest’s net income was $522 million, down 2.6% year-over-year as new deals with pilot and flight attendant unions coupled with a $154 million increase in fuel costs combined to push expenses up 7.1%.

The airline’s total operating revenue during the fourth quarter was $5.08 billion, up 2% from 2015 and $40 million ahead of analyst expectations, according to Seeking Alpha. The revenue increase came as Southwest grew its capacity, measured as available seat miles, by 5%, offsetting a 3.7% decline in the average passenger fare.

Originally published in Travel Weekly by Robert Silk /

 

 

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