Southwest’s ‘bags fly free’ likely to be hurdle for Elliott
The fate of Southwest Airlines’ popular “bags fly free” policy is likely to be among the most contentious issues to be broached as activist firm Elliott Investment Management pushes for changes after taking a $1.9b stake in the carrier. Southwest is alone among US carriers in letting passengers check two bags at no cost, giving up the potential for millions in revenue in exchange for a service that sets it apart from rivals. While the carrier recently opened the door to evaluating other changes to its long-held business model, like assigned seating or some sort of premium product, it’s remained steadfast that bag fees aren’t part of the review. Elliott appears to have a different view, noting in a website presentation that Southwest has “written off” revenue opportunities implemented across the industry over the past 15 years, including assigned seating, premium products, a bare bones basic economy fare and checked bag fees. Carriers globally collected $33.3 billion in baggage fees last year, up nearly 15% from 2023, according to an annual study by IdeaWorks and CarTrawler. But rushing to change too much at Southwest, the US carrier that has held most tightly to its culture and quirky differences, could turn away long-time loyal customers. Such a change could be “traumatic” to Southwest’s customers, culture and employees, said Jay Sorensen, president of IdeaWorks. “It is a stunning distinction because no one else is doing this,” he said in an interview. “How many times do you get that opportunity in life as a marketer? This is something that is to be preserved, perhaps at all costs.” <br/>
https://portal.staralliance.com/cms/news/hot-topics/2024-06-12/unaligned/southwest2019s-2018bags-fly-free2019-likely-to-be-hurdle-for-elliott
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Southwest’s ‘bags fly free’ likely to be hurdle for Elliott
The fate of Southwest Airlines’ popular “bags fly free” policy is likely to be among the most contentious issues to be broached as activist firm Elliott Investment Management pushes for changes after taking a $1.9b stake in the carrier. Southwest is alone among US carriers in letting passengers check two bags at no cost, giving up the potential for millions in revenue in exchange for a service that sets it apart from rivals. While the carrier recently opened the door to evaluating other changes to its long-held business model, like assigned seating or some sort of premium product, it’s remained steadfast that bag fees aren’t part of the review. Elliott appears to have a different view, noting in a website presentation that Southwest has “written off” revenue opportunities implemented across the industry over the past 15 years, including assigned seating, premium products, a bare bones basic economy fare and checked bag fees. Carriers globally collected $33.3 billion in baggage fees last year, up nearly 15% from 2023, according to an annual study by IdeaWorks and CarTrawler. But rushing to change too much at Southwest, the US carrier that has held most tightly to its culture and quirky differences, could turn away long-time loyal customers. Such a change could be “traumatic” to Southwest’s customers, culture and employees, said Jay Sorensen, president of IdeaWorks. “It is a stunning distinction because no one else is doing this,” he said in an interview. “How many times do you get that opportunity in life as a marketer? This is something that is to be preserved, perhaps at all costs.” <br/>
