Southwest should rethink bag fees policy: analysts

Washington DC
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Two Wall Street analysts have called on Southwest Airlines to consider charging for bags in order to boost revenues at the Dallas-based carrier.

"I am surprised they are not experimenting with bag fees," says JP Morgan's managing director Jamie Baker at the Boyd Group International Aviation Forecast Summit in Baltimore, adding that the airline seems to be going through an "identity crisis".

Southwest does not charge passengers for the first and second checked bag, and ancillary revenue has slipped recently as it continues to integrate subsidiary AirTran into its operations. AirTran, like many US carriers, had charged for bags.

The airline's chief executive Gary Kelly said during a recent earnings call that Southwest does not plan to charge for bags in 2014, but did not fully close the door on the idea.

Andrew Davis, vice-president at T. Rowe Price, says at the summit: "I'm concerned about the unwillingness to try these things [bag fees]... They had it with AirTran but they have distanced themselves away from it."

He adds that the reduction in ancillary revenues has definitely dragged down Southwest's overall earnings.

Baker says he would like to see Southwest "de-emphasise" its emphasis on protecting its brand, which the airline cites as the main reason for not rolling out bag fees.

However, Southwest chief marketing officer Kevin Krone indicates later at the summit that the airline is still a way off from implementing such fees. "I can't find anyone who likes bag fees. Just because airlines are charging them doesn't mean people like them," says Krone. "You create loyalty when you offer a service that people like."