Southwest To Add New Fees For 2013

December 14, 2012

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Southwest Airlines said it will implement new travel fees next year as part of a plan to increase revenue by USD$1.1 billion.

The company told investors on Friday that it will raise fees on third bags and overweight baggage, increase fees for flights on AirTran, the carrier it bought last year, and roll out new fees tied to the sale of open and premium boarding positions at airport gates.

The company also said it would implement a no-show fee for restricted tickets that are not cancelled by passengers prior to departure.

"This should add ancillary revenue and promote customer behaviour that allows us to re-sell the open seat prior to departure," Southwest chief commercial officer Bob Jordan said of the no-show fee during the investor meeting.

Southwest, which has a "bags fly free" policy under which there is no charge for a first and second checked bag, said the fee changes were expected to contribute about USD$100 million to revenue next year.

Of the USD$1.1 billion in revenue gains it expects next year, USD$300 million would come from the new fees and other moves related to improving operations, the Dallas-based carrier said.

The traditional discount leader, Southwest is now finding it must work harder to stay profitable in the face of cost pressures and rising competition.

Southwest has stressed a need to cut expenses to compete better with rivals that have restructured. Last year's Chapter 11 filing by American Airlines leaves Southwest as the only major US carrier that has not reorganised in bankruptcy.

Southwest's cost advantage compared with rivals "is not as great as it was in the year 2000 but is still very significant," chief executive Gary Kelly said.

"This is critical for our past success and of course critical for our future, to maintain our cost advantage," Kelly said.