Southwest CFO: ‘Our Customers Don’t Like Bag Fees So We Don’t Like Bag Fees’

As Southwest Airlines ponders international expansion and what CFO Tammy Romo calls “50 new dots we could add to the map with the current range of the 737,” it won’t be doing so with bag fees.

Speaking at the Morgan Stanley 2nd Annual Laguna Conference September 15, Romo said: “Our customers don’t like bag fees so we don’t like bag fees.”

There you have it; controversy over: The first two bags will continue to fly free to places such as “Canada, Alaska and Hawaii,” which are among the 50 new dots that Southwest will consider filling in on the map, but “in a very measured fashion,” Romo said.

Referring to premium boarding at the gate, EarlyBird boarding, Business Select and cargo, Romo said the airline “has opportunities to grow ancillary revenue without charging for bags.”

Speaking of expansion, by the end of 2014 Southwest will have 44 daily trips at Reagan National Airport (DCA) because of slots the airline picked up there in connection with the American Airlines-US Airways merger, and that contributes to Southwest becoming the largest carrier across the three Washington, D.C.-area airports, Romo said.

Southwest would be supplanting American-US Airways in that regard.

LaGuardia, which also saw Southwest adding slots, is already up to 33 daily flights, Romo said.

As of March 2015, Southwest will be flying to eight international cities, including the just-announced San Jose, Costa Rica, Romo said.

Its growth plans in 2015 will focus on Dallas Love Field, which is seeing Wright Amendment restrictions expiring in “less than 30 days,” Romo said.

Only 1% to 2% of Southwest’s capacity is currently for international flights so airline managers feel “great excitement” about the international opportunity, Romo said.

Southwest is building an international facility at Houston Hobby Airport, but it won’t be ready until the latter part of 2015, Romo said.

“I do think that will be an important milestone for Southwest,” said Romo, referring to Houston Hobby and adding that the airline currently carries one in four U.S. passengers.

Southwest is also focusing on increased revenue opportunities on the tech side of things.

The airline introduced an international reservations system, developed by Amadeus, this year, and Amadeus is on tap to replace the domestic side of Southwest’s reservations system, with portions of it handled currently handled by Sabre, in 2016, Romo said.

The multi-year replacement of the Southwest domestic reservations system will come with new revenue opportunities, particularly in revenue management, Romo said.

And, all without bag fees.