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Southwest Booming With ‘Free Bag’ Policy

Bummed about paying $20 to check a bag? Southwest sure hopes so.

Southwest is the only U.S. airline that lets passengers check two pieces of luggage for free. And as it heads into the Christmas travel season, Southwest is continuing its "bags fly free" ad campaign, which it says has shown results.

Gary Kelly, Southwest's CEO, says the no-fee policy has helped the airline increase its share of the domestic market by about 1%, or $800 million to $900 million.

"Our low-fare brand, which has been underscored this year by the immensely successful 'bags fly free' campaign, has driven traffic growth at Southwest in a time when we are actually reducing our capacity and the domestic market is actually shrinking," Kelly said at the Next Generation Equity Research Conference in New York City last week.

Most carriers charge $20 to check one piece of luggage at the airport. But fees can run as high as $25 for a first bag and $35 for a second. The Southwest ads tout that a traveler on a competing carrier could wind up paying $100 round trip for checked luggage.

The fees can multiply quickly for families toting bags over the holidays.

The no-fee policy can be a gamble. At a time fewer people are flying and airlines seek every dollar, checked bag fees added up to $1.24 billion for airlines in the first half of the year.

But some travelers and marketing analysts say it's smart for Southwest to stand apart from the pack and refrain from wringing yet another fee out of recession-weary fliers.

"I think it's a smart marketing ploy, particularly given the economic circumstances most Americans are experiencing these days," says Lopo Rego, a University of Iowa marketing professor.

Matthew Daimler, founder of SeatGuru, a website that offers information on airplane seating, says he's considering bag fees when planning vacations.

"When I was planning my ski trip in January, I thought about the bag charges, and I'm still thinking about the bag charges," Daimler says. "Is it going to change my behavior? Probably. Unless I'm flying with Southwest."

Dave Ridley, Southwest's senior vice president for marketing, says the airline can't promise that it'll always go against the industry tide and not charge. But he says it wants to maintain a policy that for now makes it unique.

"We've clearly hit a passion point with the customers in identifying something that really matters to everyone that flies," he says. "We don't want to look a gift horse in the mouth."

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