Southwest CEO: Why They Don't Charge For Bags

Southwest Airlines Co LUV has always been a marquee brand thanks to the ‘unconventional’ advertising methods it used in the past. However, it’s not one of those companies that charge you extra for the ‘brand value’, but instead it remains perhaps the only airline in the country that offers host of freebies to its travellers from free checked bags to free TV to free WiFi.

Even after dolling out such freebies the company remains profitable and witnessed its stock doubling in the past one year. What makes Southwest tick? And how it doles out such freebies in an industry where competitors charge for almost any service possible? Gary Kelly, chairman and CEO of Southwest was on CNBC recently to answer those questions and to explain the company’s low-cost strategy.

“For years we have said we didn’t want to have hidden fees, but I would take a step back from there even and say we are America’s low-fare airline, we are certainly America’s largest and leading low-fare airline and everything that we think about that really flows from that positioning.”

On free checked bags Kelly said, “Now, we have got this incredible distinction, which is a gift from our competitors to be different by not nickel and diming customers. Customers hate bag fees and Southwest Airlines is a beloved brand, so we do it really well, we carry more customers in the United States than any other carrier by far and bags fly free as a major reason for that.”

Kelly revealed that Southwest’s research shows that there aren’t many monetization opportunities available for stuffs that the airline offers for free and that if it would start charging for baggage it will lose more revenue than it will gain because that will result in losing customer.