Over the last several weeks, Southwest Airlines has made some big announcements. First, it announced that its “open seating” policy will be a thing of the past, now switching to assigned seating and offering premium seating as early as next year. The other doozy they just dropped (it tickled me to write that,) is that the airline will now be charging for baggage.
There were some less-doozy-ish announcements too, like making its fares available on aggregators like Expedia, significant changes to its loyalty program and a partnership with Icelandair.
This reminds me a lot of that whopper of a whiff (now I’m on a roll,) by Dunkin Donuts a few years back. (See post here.) Let that – and the subsequent parting of the ways with CMO Tony Wesman – be a lesson on self-inflicted marketing wounds.
Now, turning back to this mother of a misstep, (it just comes naturally to me,) let’s look at how Southwest was different from all other airlines. First, it did not have assigned seating. You just got on the plane and sat where you found one. Second, it never charged baggage fees. In fact, you could check up to TWO bags for free. They had a robust and passionate consumer base that preferred Southwest’s quirky, “we’re-not-like-the-other-guys” approach. It’s what contributed to the idea that Southwest was the airline “with heart and hospitality.”
As an aside, Southwest was quite different operationally as well. They chose to fly the same airplanes (interestingly, the Boeing 737, which includes the 737 Max 8,) across their entire fleet. This meant that their maintenance and mechanical functions could be streamlined for both speed and efficiency. By not serving other manufacturers, Southwest never had to wait for an Airbus expert, or contact a McDonnell Douglas specialist, if some kind of maintenance was needed on an airplane. That same efficiency carried over to sourcing parts, and buying in bulk…all Boeing OEM and likely the same third-party suppliers.
When you look at any marketing category, it’s sometimes hard to see which player has an advantage, or if any player has an advantage at all. That was never the case with the domestic airlines category: Southwest was BY FAR the most strategically well-positioned brand in the category. Those consumer-facing and behind-the-scenes aspects of the brand made the company interesting. And different. And almost entirely focused on keeping costs down for the consumer, which was always welcome news in a world where the price of everything seems to be going up, up, up, and fast.
As a result, Southwest pretty much beat the snot out of their rivals. Planes always full. Reviews always positive. Loyalty always very high.
Enter Elliott Investment Management. They’re some hot-shot hedge fund that likes to get press by “activist investing,” which is code for acting like a big baby after you buy a significant stake in a company. Led by Paul Singer, their founder and lead investment officer, Elliott purchased a roughly 10% share (about $2 Billion) in Southwest Airlines in June of 2024, and began to systematically trash the house. First they called a “special meeting” to openly criticize the CEO and the board of directors for not chasing profits. Then they forced resignations and retirements of key executives, installed their own CEO and half a dozen other cronies, all of whom likely devised these “policy changes,” like trying to wring up to a hundred bucks more out of every Southwest passenger on every flight.
So – if you want to know why Southwest would basically chew off its own arm when it had an established and defensible market position, it might simply be because some rich dude in Palm Beach wants to show the world how big his balance sheet is, legendary brand position be damned.
IMHO, this won’t end well for Southwest in either outcome scenario. If the company makes these radical changes, and it starts to deliver a profit in a year or two that would be acceptable to Elliott Investment Management, then I’ll eat crow AND they will have done so at the expense of a wonderfully and strategically differentiated brand. They’ll just be another commoditized domestic airline that consumers will shop based on slim price margins and/or if they service a particular destination. I think I’ve heard of them…JetBlue, right?
And what if Southwest Airlines does NOT show a profit? What if they lose more money? What if they become poach-able by some other airline that finds their routes and their operations desirable? Well then, Mr. Singer, you’ve killed a very successful company AND a very important brand for no good reason.
And that’s why I’m miffed in my mittens: either way this goes for the company, a really strong brand dies in the process.
Listen kids, work as hard as you can to make your brand different in some meaningful way.
Be different.
STAY different.
Even at the expense of some nominal basis points in potential additional profit.
Real brands with real positions are hard to come by these days.
Marketing Thingy 