Friday, May 22, 2015

Southwest Airlines: Monetizing Imaginary Money

Southwest Airlines is a great example of one of those love-hate relationships that just make you crazy. On the one hand, with their unique approach to service, Southwest Airlines revolutionized our expectations of low cost airfare. So often, when you see some of the financial results come out for the various airlines and Southwest is profitable while other airlines struggle, you can't help but cheer. In part it's like, "see, you can be a nice, fun environment with low cost airfares and still be profitable." But regardless of however many quarters Southwest outperforms them financially, they never seem to learn the good lessons and the airline industry as a whole seems to strive for the gold-standard in sucktastic customer experience, the cable company.

But yes, in the midst of all of that, there are aspects of Southwest Airline's service that you want to love. Price is one. Once upon a time, you could hop on a plane to LA and return for under $100. These days, that number looks closer to $200, but it increasingly comes with caveats.

Over the years I've spent many hours in airplanes on many carriers. There have been a few years where my percentage of travel was close to 50% -- not as great as some, but not insignificant. It used to be that there was a certain amount of credit given to seasoned travelers. For most of us that traveled on business, your main goal was a streamlined trip through the airport travel experience. That meant a carry-on because you didn't have time to waste with checked baggage. It also meant your were flexible with your routes; changing flights was no big deal. But when most of the airlines started charging for carry-on baggage, suddenly the overhead space became crowded with Aunt Susie and Uncle Pete's luggage. They didn't care about efficiency, they just wanted to save money -- or they were afraid of losing their luggage.

For business travelers and premier flyers, "perks" like boarding early weren't about anything but getting in front of the chaos that comes with boarding. Aunt Susie and Uncle Pete, meandering down the aisle, trying to find their seat. Putting their bag in sideways because the "carry-on" didn't seem like it would fit. Filling the overhead bin space with bags of snacks and souvenirs that they didn't have room for in their big checked luggage.

Southwest gets lots of these travelers who don't travel frequently. Families. People on vacation. People who may rarely fly. Their system is great if you're one of these travelers, but the chaos sucks for experienced business travelers that benefit from efficiency. No assigned seats means if you arrive for boarding at the last minute, you'll be lucky to find a middle seat in the back of the plane and your bag is probably getting checked -- no waiting around sending those last minute emails before you board. Probably the worst part of that is that you could have probably squeezed your bag in somewhere, but those people filled the bin with sideways bags have taken that space and often the Southwest flight attendants just let the chaos happen.

These are just a few of the reasons why, for business travel, Southwest kind of sucks. If you add in that, in the old days, their was no in-flight entertainment system (admittedly now an extinct feature), as a business traveler I never chose Southwest for long duration business flights. It's one thing to put up with the chaos for a 1 hour flight, it's another thing entirely to deal with that for four hours or more.

I think that this is part of the reason Southwest tried to create a "business class" boarding process and associated fare. Unfortunately, it doesn't really address the issues with late boarding and last minute, it just puts you at the front of the line when they open it up. For most Southwest flights that I've been on since they added it, it's not a time when people are actually getting seats, it's just one more thing that the gate attendant has to say before they begin letting everyone else on board.
Where Southwest Outperforms the Other Airlines
As noted, Southwest Airlines sucks for business travel on so many levels, but they actually do offer certain advantages when it comes to the number of flights. While the traditional carriers like United, American and Delta may offer only two or three flights per day to primary travel destinations, Southwest often runs six to eight flights. Don't want to catch the 6:00 am flight to LAX, take the 8:00am or the 10:00am. You can get Southwest flights throughout the day. When you're planning your departure from your home airport, it's usually easy to predict your schedule, so lots of flights may not seem like a big advantage. But where it is helpful is -- if you know you need to arrive in LA by 5:00pm, you select an early flight, say 12:00pm, and if something happens to delay that flight (incoming flight problems for example), you probably have two or three options for later flights that will still get you to LA in time.

Historically, this has also been true with return flights. If something happens and your on Southwest, there are probably several more flights that day that could get you there -- you probably won't be stuck overnight. As I mentioned in my Twitter posts related to this, in the past, I've also happened to show up at the airport early and been able to get on an earlier flight just because it wasn't crowded and they let me go as standby.

Unfortunately, twice in the last year, I've booked flights on Southwest specifically because of the multiple flight advantage, then managed to wrap up my business and get to the airport early, hoping that I might be able to get on an earlier flight. Both times, the Southwest customer service rep informed me that I couldn't change my flight without paying more than $100. When I wrote about this on Twitter, here's what Southwest Airlines customer service had to say:
and this was their comment on me noting the "no change fees" promotion in the jetway boarding my flight.

With nothing to do in the airport on Wednesday afternoon, I had lots of time for Twitter.

Technically speaking, Southwest is correct. If you're changing the ticket and there is a new corresponding fare and you're not charging something extra to make that change, it's not really a change fee. But while legally your statement may be accurate, as a customer, it feels a lot like a "fee" to change. Put a different way, if you have to argue the nuance of language with your customer as though you are a lawyer, you've already lost a marketing battle, particularly when the nuance involves just how much it's going to cost the customer.

Still, when you drill down into it, the tone underlying this debate is essentially something like this, "you're trying to get over on us." You selected one of our "loss leader" low cost fares, and now you expect to be entitled to all of the 'privileges' associated with our airline. By "switching" from one flight to another "not full" flight, you cost us. Parenthetically speaking, what does this change cost? It costs the potential to charge the increased far that you would have paid if you planned to make that change. In other words, it costs imaginary money.

On Wednesday, when Southwest didn't want to change my flight and put me on standby on one of two earlier flights, they saved themselves $200 of imaginary money. $200 that I didn't spend, $200 that they didn't make, and $200 that they didn't lose by just making the change for free.

But if that's not bad enough, here's why Southwest sucks for business travel. Here's an example snapshot from my corporate travel engine. I picked a Tuesday in June for an example "trip" to LAX. As you can see from the screenshot, I have a couple of options (I limited them to Southwest between 10:00am and 1:00pm for simplicity).
If you were booking through the Southwest Airlines web site, you'd see this fare as a Wanna Get Away fare -- the fare with no changes available. But, from the corporate travel engine, it's just another flight. You can dive into the terms, but there's another factor here -- the corporate travel engine just looks at the price, $148, and bases policy calculations on that number. Want flexibility? That fare isn't shown and, if it was, it would be out of policy because this fare has set the baseline.

Then again, we should be happy that Southwest fares are even displayed. For years, if you wanted to book Southwest, you had to go outside of this system and jump through corporate hoops just to select them.

So congratulations Southwest Airlines. You're watchful management of my airfare has saved you hundreds of imaginary dollars over the past year and all you really lost was the "happy" that used to be connected with the "customer" when you described me.

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