Southwest Airlines' "New Coke" Moment

In the past few months, Southwest Airlines has been taking on some major changes in how they fly people. Southwest had several unusual or unique ways of operating, including open (unassigned) seating and free checked bags. It also had an offbeat, loyal workforce that was maintained through a corporate history of never having a layoff. Now all of those are being removed and it makes me both a little sad (end of an era) and wonder whether it will actually work out for the company. It makes me wonder about...New Coke.

Southwest's Decision

Although Southwest has been profitable most years, has it been profitable enough? Investment firm Elliott Management says no, and they now have the power to decide. Every other US airline (or almost every?) has embraced ancillary fees like seat-selection, premium seating options (e.g. extra legroom, seats near the front), and baggage fees. So why shouldn't Southwest get its cut? They did market research and it looked like they would gain more customers who wanted assigned seats than lose customers who liked the previous boarding method. And if you don't want to pay for baggage, who else would you fly instead? So Southwest is becoming more like its competitors. And what does this remind me of?

New Coke.

In 1985, Coca-Cola was losing ground to other soft drinks, and in a quest to regain market share, it created a new recipe mimicking its biggest competitor Pepsi and replaced Coke with New Coke. It...did not go well. Coca-Cola had to reverse itself in only a few months after a massive public backlash: although more people preferred New Coke in blind taste-tests, the people who preferred (what would become) Coke Classic were far more passionate, and they resented the change. Sound familiar

Southwest is jettisoning what made it unique in the marketplace. On top of that, breaking the layoff taboo runs a risk of demoralizing their workforce as they go through all of those changes.

The Future

I used to fly Southwest routinely, although I'm rarely on them now. It just happens that almost everywhere I need to fly requires a stopover for Southwest, and I prefer non-stops whenever possible. And I preferred the Southwest boarding method.

In addition, Southwest could get significantly more use out of its airplanes: open seating boards faster, and having free checked bags meant fewer carry-on bags in the cabin, which in turn gets people into seats faster because they don't need to stop to stow their bags. Faster boarding and disembarking means more time in the air for the airplane, which means each airplane might be able to get to one more destination per day.

In conclusion: Southwest might run into customer backlash, and risks slower turn-times that will delay flights and potentially even cancel them (with expensive non-revenue repositioning flights to compensate). Or maybe they can keep the same aircraft-utilization and gain some ancillary revenue to go with it.

What do you think? Is Southwest Airlines having a New Coke moment?

If you have any comments, please reach out to me at blog@saprobst.com or this page is cross-posted at LinkedIn and you can leave a comment there.