Larry Kellner, the former CEO of Continental (up until this year), said that when whoever it was started charging for bags he was against it. However, they tried a couple of things. First they tried to increase the ticket prices by just a little in order to compensate for the increase in fuel costs. They found that people chose other airlines even if the price for the Continental Flight was cheaper overall after you take the other airline's baggage fees into consideration. Next, they kept the prices the same and people STILL didn't show a tendency to choose Continental over the other airlines any more than normal even without the baggage fees. Since no one seemed to actually care, they started charging for bags because otherwise they were leaving about about $200,000,000 per year on the table. People pull up Orbitz or whatever and just choose the cheapest flight without taking other factors into consideration it seems. Frequent flyers don't get charged for bags anyways.
What do you mean by excuse? Are you suggesting the airlines are intentionally operating at a loss for decade just so they can charge you for bag fees? SWA went to Vegas and took a bet on fuel hedges. They won BIG! Bravo. It doesn't mean there is a profit taking conspiracy to charge you extra. SWA is simply using the bag fee issue as a marketing ploy to pick up customers and they have the flexibility to do so because of the fuel hedging. Once that goes away, SWA will be back inline with the rest of the industry ...which is that fuel is the single largest expense for every other airline.
There's a reason that Southwest is the subject of dozens of HBS case studies. Simply put, their entire business model puts the rest of the industry to shame. A few examples of how they're more operationally efficient than others: - No traditional "hub and spoke" system. So they don't have to route their flights through specific airports where gate fees are really high. Also if there's weather delays, it doesn't screw up their entire network. - Fleet consists of exclusively 737's. Results in the lowest maintenance costs as % sales due to common parts and better pricing from Boeing. - Only operates short haul flights. This minimizes losses from flights that are underloaded. For example if AMR operates a flight from SFO to Narita that's only 70% full, they lose a ton of money - No Assigned Seating. Saves millions on IT expenditures, and enables quicker boarding and throughput times.
I've heard they also have much better deals with their pilots. Southwest is a perfect example of efficiency. Too bad they don't sell Health Insurance.
I did a marketing project on SWA and flying exclusively 737s is a BIG BIG boon for them (right after fuel hedging of course). 1. There's no need to train their pilots to fly any other planes because every SWA plane is a 737. 2. Keeps maintenance costs down (instead of have different fleets to worry about they only need to worry about 737s) I agree that once their fuel hedge contract runs out, SWA will no doubt have to find another plan of action to take but there's no sign that they won't try new/different ideas.
They are certainly more efficient, but it's in part by providing a lower quality of service. If all the other carriers duplicated their model, they could save money, but you'd have to make stops to fly cross country, you couldn't fly internationally, there'd be no first class options, etc. It's definitely a more efficiently run operation, though the other carriers have been getting more price competitive with them recently (on the surface without adding bag fees, etc).
Very interesting. Just this past summer I had to do a huge report on the problems 737's used to have within their rudder systems that brought down two jetliners (nearly a third too) and almost resulted in the entire fleet being grounded. Luckily, those problems are a thing of the past but given Southwest's success with the jet coupled with me driving past the crash site of USAir Flight 427 daily it really gets me thinking about these sort of things.
No assigned seating is the BIGGEST BS SWA does. They were losing business customers, so they went to the Business Select so you can pay more to get a slightly better seat. Southwest fares arent not cheaper. They have those WANNA GET AWAY fares, which have the most restrictions. However, the other fares are really not cheaper than Continental. Im willing to pay a little more for frills and assigned seating on Continental (First Class is a great thing on LONG Flights......free alcohol
Bailout? They didn't ask for bailout money and there has not even been any discussion that they will.
I'm thinking you aren't understanding my posts. I simply stated that the airlines were operating at/near bankruptcy prior to 9/11 and post 9/11. They had fundamental financial issues prior to 9/11. 9/11 was used as an excuse to get a bailout that kept some on life support. Until the numbers of airlines is reduced this will be an ongoing problem
Continental is the winner from ATL to NY. The time I'm considering going total after taxes is just over $400 for 2 of us. Still, I might consider driving just because I've never been to the Northeast past DC, and would like to go to Boston, and I don't think my wife has been to DC.
What bailout? No airline asked for or received bailout $. If you are talking about Chapter 11/13, then yes several airlines did. But not Continental. So just looking at Continental, they are not before/after 9/11 in financial trouble and have not asked for bailout $. All they are doing to trying to modify their business strategy to earn a profit ...something they haven't done since 9/11, gas spikes, recession. All this anger aimed at our banking system is misguided if you are redircting that to the airlines. Apples/Oranges
not that I see many here, but the few elitist posts about Southwest are ridiculous. like I said before, you don't need to pay more to get the better seat on Southwest, all you have to do is check in online precisely 24 hours before your flight, and you'll get in the "A" group after all the people that did pay more to essentially get a free drink. and yes, fares on SWA are absolutely cheaper right now and have been for flights in the .... wait for it... Southwest area of the United States
What does that have to do with charging for bags? Continental, as even quoted in the article, was not one of the airlines they were worried about. Despite, they've been in a down trend since 9/11 that they haven't recovered from. Yes, SOME airlines were in trouble before. But that isn't relevant to why the industry as a whole has adopted the strategy to charge for bags. The reason they are charging for bags is to try to return to profitibility ...AS A WHOLE. 9/11 wasn't an excuse. It was a fact.
Of course the 737 planes aren't the newest or best by any means and it might need more repairs but this definitely plays a role in how SWA can afford to keep their fares low. IMO,SWA will need to upgrade their fleet in the near future (afterall, comfort and a sense of security are still things that a passenger wants) and it'll be interesting to see how they do it without falling into line, price-wise, with the other airlines.
For sure. I wasn't implying that those jets are unsafe or anything. Just saying that i'm pretty much an expert on the history of the B737 by this point, and if you play the word association game it's hard not to hear the plane mentioned and not think Southwest. Southwest's ridiculously effective business model can do that to the brains of people!
