Southwest: No Fees Mean Big Profits

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It’s been a tough year for the airline industry due to the ailing economy, terrorism threats and the volcanic eruption in Iceland. Yet, one airline claims to be doing just fine.

Southwest’s CEO said yesterday that the airline had earned an extra $1 billion in revenue by refusing to impose a checked baggage fee. According to the CEO, Gary Kelly, this has allowed Southwest to siphon off customers from competitors who charge anywhere from $15 to $100 to check your bags.

USA Today notes that there is little evidence to verify  these claims, but Southwest maintains they have seen an increase in the number of passengers while other airlines have seen their numbers go down. And prior to this announcement, reports had already shown that Southwest, unlike the vast majority of airlines, managed to finish last year in the black with a modest profit.

Southwest has actually gone so far as to turn their policy of not charging for checked baggage into a powerful advertising campaign. The airline has adopted the slogan, “Free Bags Fly Here,” and according to The Seattle Post-Intelligencer, Southwest plans to use stickers and banners to place the slogan on 50 planes during the next six weeks.

Unfortunately, even if Southwest’s claims are true, it’s unlikely that the airline industry as a whole will shift toward fewer airline fees. In 2009, the airline industry earned $2.7 billion in airline fees, which is certainly a lot, but without this revenue, they would have ended up at more than $1 billion in the red. As Yahoo News points out, “every single dollar” they made came from these fees.

Of course, even Southwest doesn’t have a perfect record when it comes to other airline fees. The company is notorious for requiring overweight passengers to pay for an extra seat and, in some cases, kicking them off the flight all together. But I guess they probably don’t want to turn that into a marketing slogan.

Check out our roundup of the most absurd airline fees here.

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