Southwest Airlines is posting earnings in the last quarter, despite refusing to charge passengers for checked bags, as their competitors have done. Their traffic rose 1.6 last quarter, compared to their numbers from last year, and Gary Kelly, CEO, thinks his refusal to follow the trend is a strategy that’s working.
Southwest still rakes in revenue from other amenities provided at a cost, raised fares, etc. Other additions that cost a little more are Business Select seats where passengers must pay extra for early boarding and a cocktail. Parents sending an unaccompanied minor must also bear the brunt of raised fees.
However, the average traveler is seeing a decreased cost in overall savings by not having to pay for checked bags, and this appears to be working for the airline. Passenger revenue per available seat mile – the formula by which the industry calculates the profitability of an airline, indicates that Southwest is dong quite well for itself.
Southwest flies more passengers than any other airline in the U.S. and these higher earnings are much needed in light of unstable fuel costs and the increased cost of labor.
Southwest, while paying more for labor, has implemented a hiring freeze to capitalize on the earnings.