Southwest Airlines may face brand pitfalls as it introduces its first premium seating product and does away with its hallmark open seating, analysts said this week, but it is also likely to appeal to a wider swatch of consumers.
Market research taught Southwest that 80% of its own customers would prefer assigned seats, the carrier revealed when it announced the changes on July 25.
During its Q2 earnings call, Southwest CEO Bob Jordan promised that in making those changes the airline would do things the "Southwest way."
"We are known for common sense, not adding complexity," he said.
The changes will be far from groundbreaking in the airline industry, but they will be a substantial departure for Southwest.
Open seating has been a distinctive feature for the Dallas-based carrier since it began flying more than 50 years ago.
But over the past decade, as other airlines have increasingly found ways to generate ancillary revenue by selling seat assignments and segmenting their economy cabins, open seating has also evolved into something of a revenue shackle for Southwest.
In a June analysis, investment analyst Savi Syth of Raymond James estimated that assigned seating could eventually help Southwest make as much as $2 billion annually.
Similarly, Southwest's single-cabin planes, which don't offer extra-legroom seats except in exit rows, have hamstrung the carrier as consumer tastes have shifted toward premium products post-pandemic.
Extra-legroom seats, Syth estimated, could accrue $500 million to $1 billion for Southwest annually.
Southwest has yet to say when it will begin assigning seats, though it expects such bookings to be offered for sale at some point next year.
The airline also hasn't put a timeline on introducing extra-legroom seats. Each retrofit will be quick, Jordan said, but the entire process will be time-consuming since more than 700 planes will have to be converted. The carrier said more specifics would be laid out at an investor day event in late September.
One thing Southwest has said is that it plans to go heavy on extra legroom, converting approximately one-third of its seats to the more upscale product.
Jordan elaborated a little on what he defines as the "Southwest way" by clarifying that the seats themselves will be the same as standard economy seats and that the product won't come with luxuries such as meal service and curtains.
"We're not going to change the core of what we stand for: true hospitality," he said.
Southwest's culture cuts both ways
Mario Matulich, president of Customer Management Practice, an events company that has relationships with airlines as well as a research and advisory arm focused on studying the end-to-end customer experience, said that Southwest has indeed always had a strong customer-centric brand. However, that was undermined by its operational meltdown during the 2022 holiday season and by evolutions at other airlines.
Southwest, Matulich said, long stood out for the choice, flexibility and the overall customer experience it provided, in part due to its open-seating policy.
Now, other airlines are providing a more modern version of customer choice and service in the form of elevated digital experiences, something Matulich said became sharply more important to consumers during the pandemic, but that isn't easily adaptable to an open-seating sales model.
"They are known as the airline that doesn't assign seats. What will Southwest now be known for, and how will they attract customers when they go and compete with many of the airlines that have been doing this for many years," Matulich said. "It is going to be a massive challenge for them."
As it transitions to look more like other airlines, Southwest should double down on digital, Matulich added, and also on its company culture that has long delivered a more laid-back, fun atmosphere than other airlines.
Brad Beakley, CEO of travel industry consultancy Hospitio, said Southwest's human touch is the core of its brand.
"The people you talk to at Southwest, they deliver their love," he said, referencing a catchphrase the airline itself likes to use. "That's the reason they didn't take a bigger ding with the IT meltdown or their ridiculous seating policy. It's a friendlier, more casual vibe that they have going."
In disparaging Southwest's open-seating approach, Beakley referenced the internal research that Jordan revealed on July 25, which showed that 80% of its current customers and 86% of potential customers prefer an assigned seat.
Those numbers beg the question of why it has taken Southwest so long to make this change, Beakley said, echoing sentiments raised by other analysts.
He said that he struggles to see a downside to Southwest's pending cabin and boarding changes, noting that the airline will retain its popular free checked bags. In fact, Beakley said, in overhauling its boarding procedure, Southwest has an opportunity to come up with a process that is better and more orderly than its competitors.
"I struggle with thinking there is much negative to this part of the decision," he said.