Skift Take

Some pundits favorite sport -- speculating that Southwest will scrap Bags Fly Free -- can end right now. Southwest makes a lot of money in the form of customer retention and growth by not charging fees for first and second checked bags, as well as for changing flights, and there won't be any changes in these signature policies in 2014. So ruled CEO Gary Kelly.

You can stop all the conjecture and paranoia because Southwest Airlines won’t begin to charge fees for first and second checked bags or changing flights in 2014.

Thus declared CEO Gary Kelly during the company’s fourth quarter earnings call today.

“We love the word ‘free’ at Southwest,” Kelly said.

That extends to Southwest’s no-change fee policy. Kelly said the airline loves it when competitors increase their change fees because “it creates a better low-cost advantage for Southwest.”

There had been a lot of speculation last year when Southwest launched an ad campaign that was less maverick and more corporate than usual that Bags Fly Free would be a casualty, but Kelly stomped on that idea for 2014, at least.

In 2013, United, American, US Airways, and Delta were among the carriers that raised their change fees, with United hiking the fee to $200 for domestic tickets, up from $150, and to $300 for international flights, up from $250, for example.

Bob Jordan, Southwest’s chief commercial officer, said a little more than 10% of Southwest’s passengers change their flights — for free, other than having to pay the fare differences. “It is a consistent win for us and a loser for everyone else,” Jordan said.

Of course, Southwest makes a ton of money on fees for for bags after the first two, pets, unaccompanied minors, EarlyBird Check-In, Business Select, and Rapid Rewards. And, last year it launched stiff no-show fees amounting to the entire non-refundable fare.

In other news, Kelly said Southwest is poised for an “historic” 2014, where Southwest will basically take on all of acquired AirTran’s international destinations.

“By this time next year the AirTran brand will be retired and it will be all Southwest,” Kelly said.

Kelly said “we don’t expect any bold moves” on international service in 2014, other than taking on the AirTran routes, but this sets the stage for more international routes in 2015, especially with the completion of its new terminal at Houston Hobby Airport, which is slated for late that year.

In addition to the Caribbean and Latin America, Kelly was asked whether Southwest plans on flying to Hawaii. He said Southwest has made the investments in technology and equipment to have the option to fly to destinations such as Hawaii.

“Now we’ll have those opportunities in place,” Kelly said. “We’ll have a wealth of opportunities to choose from.”

An international reservation system developed by Amadeus “is exactly on schedule,” Kelly said. “I could not be more proud of the work we have done.”

He said Southwest is poised to scrap its domestic reservation system, which Sabre supplying part of it, and that a decision on a new vendor would be announced in the first half of 2014.


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Tags: checked bags, fees, southwest airlines

Photo credit: Southwest Airlines CEO Gary Kelly gestures as he briefs reporters on his low cost airline's plans for the future, including dealing with higher fuel costs, destination expansions and customer service, at the Reuters Aerospace and Defense Summit, in Washington, December 5, 2007. Mike Theiler / Reuters

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