No-bag-fees Strategy Could Help Southwest in the Long Run

While airlines continue to rack up even more revenue by charging higher checked-baggage fees, Southwest remains resolved to let bags fly free, saying it has enabled the carrier to capture market share from its competitors.

And a recent report analyzing the baggage-fee bonanza suggests that while Southwest might be forgoing hundreds of millions of dollars in immediate cash, the low-cost carrier’s strategy promises to pay off in the long run as fed-up passengers make the switch to avoid paying the extra baggage charges.

Consultancy IdeaWorks estimated that Delta, American, Continental, United and US Airways would together realize annual baggage fee revenue of about $1.76 billion. Southwest would stand to pocket $732 million annually if it initiated a baggage fee, IdeaWorks estimated.

But, IdeaWorks warned, “Corporate hubris may push the industry to some sort of tipping point. Southwest’s management (and its investors) should expect and require healthy market share gains from its bold product positioning endeavor.’