Did you ever find cash in your couch cushions? Or a $20 bill you'd forgotten about in last year's coat pocket?

This story is kind of like that--only it's about a lot more money, and it's about Southwest Airlines making out like a bandit, not you and me.

If you spend any time traveling by air, you're like aware that Southwest is the only major commercial airline that doesn't assign seats. You board the plane, you sit down wherever you see an empty spot that looks enticing. But that of course means that there's an extra advantage to boarding early.

For decades, you either had to show up at the gate early, or check in online right at midnight to get an early boarding position. But in 2009, Southwest realized that people would be willing to pay for the right to board first.

They launched EarlyBird Check-In, first for $10, then $12.50, and most recently for $15 a flight. And it turned out to be a major cash cow. Last year, Southwest said it made $358 million from selling early boarding privileges.

So, you might rightly wonder now: Why are they messing with a good thing?

Dynamic pricing

Open seating is here to stay at least according to Southwest CEO Gary Kelly. But EarlyBird Check-In is getting a significant change. In summary, the flat fee is going away, to be replaced with a sliding scale that will depend on two factors: 

  • Length of the flight
  • How many other people also want to buy EarlyBird Check-In passes

For now anyway, the range of prices will be between $15 and $25 depending on the flight, according to internal Southwest Airlines documents reviewed by View From the Wing.

Of course, Southwest reserves the right to "update pricing in the future based on route popularity and as the product continues to evolve," according to the internal document.

Messing with $200 million?

It's a bit tougher to break out exactly how much money Southwest has made from EarlyBird Check-In so far this year, but my estimate is at least $200 million (up from $358 million for all of 2017).

. In short, Southwest doesn't break out EarlyBird in its quarterly reports apparently; just the annual one at the end of the year. But it accounts for the lion's share of a bigger bucket that Southwest calls ancillary revenue, and ancillary revenue is up 17 percent so far in 2018.  

We have to take a small educated guess, but that would put EarlyBird Check-In on track to do about $418 million for the year. Figure half that so far, in the first six months of the year.

A is better than B which is better than C

Of course, Southwest has to be betting that revenue will go up under the dynamic pricing plan. And I'd suspect it would.

If you're willing to pay $15 not to be stuck in a middle seat toward the back of the plane on a cross-country flight from say, Newark to Los Angeles, you're probably willing to pony up an extra $10.

Because Southwest might be America's most popular airline--but still, nobody wants to be in Group C, if they can avoid it. And for $15 to $25, they almost certainly can.

Published on: Aug 18, 2018
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