Southwest Airlines Co., the discount carrier with the “Bags Fly Free” slogan, forecast $100 million in annual revenue from fee changes that will include the first charges for no-shows on flights and premium boarding positions.
The new fees and increases to existing charges will start in the first quarter, Chief Commercial Officer Bob Jordan said Friday at an investor meeting in New York. Dallas-based Southwest expects to boost revenue by $1.1 billion in 2013 as it works to cover rising labor and jet-fuel costs amid growing competition.
Southwest’s fee moves mark a departure from its reputation as a no-frills carrier that bucked the rest of the industry by letting passengers check two bags for free and change flights without penalty. The no-show fee would be levied on passengers who don’t cancel tickets before a flight.
“This one is pretty industry standard,” Chief Executive Officer Gary Kelly said. “Customers understand we could all benefit from the opportunity to resell a seat. Once the airplane takes off and it’s empty, we can’t ever resell it.”
Kelly didn’t rule out that other fees may be added in the future, saying “we don’t have a first bag fee idea for 2013 or a change fee.”
With the changes, Southwest expects “a doubling or more of earnings year over year” in 2013, Kelly said, without giving details. The forecast is based on unchanged economic conditions and fuel prices. Southwest’s net income through 2012’s first nine months was $343 million on $12.9 billion in sales.
Passengers can still check two pieces of luggage for free, although charges for a third checked bag will increase an unspecified amount, said Jordan, who is also president of the AirTran unit. The overweight-bag fee will double to $100.
Southwest already has a charge to reserve an early boarding slot, and will increase that fee to $12.50 from $10. Starting next year, passengers can get an early-boarding slot by paying a fee at the gate.
At AirTran, the first checked bag fee will rise to $25 from $20 and a second bag to $35 from $25, Jordan said.
