Tuesday, February 12, 2013
Luv Lost at Southwest Airlines
Renowned British entrepreneur Sir Richard Branson once said, "that if you want to be a millionaire, start with a billion dollars and launch a new airline." He should know from experience. However, the industry exception to this humorous rule-of-thumb is Southwest Airlines, which just recorded its 40th straight year of profit, a stunning feat for an airline.
But according to a recent Los Angeles Times article, customer satisfaction at Southwest appears to on the decline. Although the company built an acclaimed reputation on possessing a greater empathy for the consumer than its competition, recent moves suggest that the airline is succumbing to pressure from shareholders as its profit margin has dropped from 4.54% in 2010 to 2.44% in 2012.
Those moves include changes to its frequent flyer program, adjusting the cabin design to add six more seats per plane, increasing the fee for a third checked bag and an overweight bag as well as adding an optional $40 charge to be one of the first 15 passengers to board the plane. Customers quoted in the Times article also griped that the difference between Southwest Airlines' fares and that of the competition is shrinking.
It should be noted that the company is keeping its "bags fly free" policy, which the Southwest credits for a 2% percent increase in market share since 2008 and for generating $1 billion annually. Still, the article includes an odd quote from Southwest Airlines spokeswoman Whitney Eichinger, one that signals a slightly different way of solving problems at Southwest today, when she says "Yes, we have to keep up with the times and, yes, we have to change. But the truth is that Southwest remains a maverick in the industry."
I maintain that solving problems like other airlines have is both proven ineffective and by definition, unmaverick-like.
The airline analysts quoted point out that, in regards to Southwest Airlines' policy changes, it remains dubious whether they will even have a negative effect because the sky isn't any bluer flying on the others carriers. That might be true, at least for now.
Could Southwest solve its profit-margin problem and maintain its unofficial title of industry maverick? Sure, and we can help. As a thought-starter, I'll suggest a passenger raffle. Passengers on Southwest flights could opt-in for $10 each (some amount) for the chance to get their flight comped or a future discount. Southwest Airlines keeps the profits and passengers could have some in-flight fun in the process.
Post your ideas in the comments section or tweet them to me. As always, thanks for reading.