Southwest will add a fourth fare level to boost revenue
DALLAS (AP) — Southwest Airlines will add a fourth fare category as part of changes designed to attract more business travelers and boost revenue.
The new fare level will be priced higher than Southwest’s cheapest tickets but below the airline’s top two fare categories. Southwest executives think this will fill the large price gap between the cheapest fares, called Wanna Get Away, and more-expensive tickets.
Consumers who buy the new fare level, called Wanna Get Away Plus, will get 33% more frequent-flyer points than the basic ticket, and they will be able to transfer the value of a ticket to another Southwest customer.
It’s the first major change in Southwest’s fare structure in 15 years. Airline officials said the changes announced Thursday will take effect in May or June.
Airlines frequently tinker with fares and fees to squeeze more revenue from passengers. In recent years, Delta, American and United have reacted to competition from discount airlines by rolling out new, bare-bones “basic economy” fares. The big-three airlines then nudge customers to pay more for regular economy seats that include the amenities that they have come to expect.
Southwest hinted at the changes back in December without giving details. The new fare level is among several moves, including a new credit-card deal with Chase Bank, that the Dallas-based airline hopes will collectively boost annual revenue by between $1 billion and $1.5 billion next year.
Executives declined to say how much more Wanna Get Away Plus seats will cost compared with cheaper seats, but it will vary by flight. Besides more frequent-flyer points and the ability to transfer credit, Plus buyers will be allowed to fly standby at no extra cost, even if there is a higher fare for the new flight.
Southwest will also add early-boarding privileges to the next priciest fare, called Anytime, to avoid cannibalizing sales of full-price tickets. Early boarding is a perk because Southwest does not assign seats, meaning that the last passengers to board a crowded flight wind up in middle seats.
Andrew Watterson, the airline’s chief commercial officer, said all the changes should be particularly appealing to business travelers. Southwest is trying to take more business travel away from Delta, American and United.
Southwest’s most expensive tickets, called Business Select, are fully refundable and include early boarding, a free drink, and the most frequent-flyer points. Anytime tickets are also refundable, while Wanna Get Away ones are not. All three include up to two checked bags for free – something other U.S. airlines don’t offer – and free ticket changes.
A majority of Southwest customers buy Wanna Get Away fares.