Assignment: Southwest Airlines Case Study
Instructions
Southwest Airlines is in transition. The airline is making several changes to their long-standing, initial brand strategy.
For this assignment, please read the following article and complete the discussion questions reflecting on the concepts learned in class this semester.
Requirements
In order to successfully complete this assignment:
- Your answers should be 150-200 words (total for both questions)
- Title your document using the following format: Name – Southwest Airlines Case Study
- Due Sunday, April 13th @ 11:59pm
Southwest Airlines will charge to check bags for the first time, launch basic economy tickets
CNBC Published Tue, Mar 11 20256:35 AM EDTUpdated Tue, Mar 11 20254:08 PM EDT
It’s happening: Southwest AirlinesLinks to an external site. will start charging passengers to check bags for the first time.
It’s a stunning reversal that shows the low-cost pioneer is willing to part with a customer perk executives have said set it apartLinks to an external site. from rivals for more than half a century of flying in hopes of increasing revenueLinks to an external site..
Southwest’s changes come after months of pressure from activist Elliott Investment ManagementLinks to an external site.. The firm took a stake in the airline last year and won five board seats as it pushed for quick changesLinks to an external site. at the company, which held on for decades — until now — to perks like free checked bags, changeable tickets and open seating.
For tickets purchased on or after May 28, Southwest customers in all but the top-tier fare class will have to pay to check bags, though there will be exceptions. Elite frequent flyers who hold A-List Preferred status will still get two bags, and A-List level members will get one free checked bag. Southwest credit card holders will also get one free checked bag.
“Two bags fly free” is a registered trademark on Southwest’s website. But its decision to about-face on what executives long cast as a sacrosanct passenger perk brings the largest U.S. domestic carrier in line with its rivals, which together generated more than $5 billion from bag fees last year, according to federal data.
Southwest didn’t say how much it plans to charge to check bags, but a single bag costs $35 to check on Delta, American and United.
Southwest executives have long said they didn’t plan to charge for bags, telling Wall Street analysts that it was a major reason why customers chose the airline.
At an investor day in September, Southwest said that it would gain between $1 billion and $1.5 billion from charging for bags but lose $1.8 billion of market share. Southwest said its “rigorous research” found that “our ‘bags fly free’ policy generates market share gains in excess of potential lost revenue from bag fees.”
Some airline executives see an opportunity.
“I think, clearly, there are some customers who [chose Southwest] because of that, and now those customers are up for grabs,” Delta Air LinesLinks to an external site. President Glen Hauenstein said at an investor conference on Tuesday, after Southwest’s announcement. “We’ll see how that plays out over the next period of time as they continue to implement multiple changes to their products.”
United AirlinesLinks to an external site. CEO Scott Kirby, speaking at the same conference, likened Southwest’s baggage policy change to “the slaying of a sacred cow” and said lower-paying customers will be most affected.
“I view it as a big deal because it’s more — it feels more financially driven — a results-driven airline than it’s ever been before,” he said.
Discussion Questions
- What is the basis of Southwest Airlines brand loyalty.
- How do think the changes described above will affect that brand loyalty.
https://www.cnbc.com/quotes/LUV
https://www.cnbc.com/2024/09/26/southwest-investor-day-proxy-battle-elliott.html
https://www.cnbc.com/2024/06/10/southwest-luv-activist-elliott-stake.html
