1. Southwest will begin charging for checked bags, a major policy shift. 2. Company's changes aimed at increasing revenue amidst market pressures. 3. New basic economy tickets will not allow free changes or refunds. 4. Executive decisions influenced by activist hedge fund Elliott Investment Management. 5. Charging for bags could yield $1.5 billion but risks $1.8 billion in lost market share.
The departure from traditional services risks alienating loyal customers, potentially leading to reduced market share. Historical precedents show similar changes often provoke backlash in airline industries, as seen with American Airlines in 2012 when they began charging for various services but suffered short-term declines in customer satisfaction and loyalty.
The article discusses fundamental changes to Southwest's customer service model, which could significantly affect stock performance. The emphasis on lost market share highlights potential downside risks, necessitating close monitoring of customer responses.
Changes affect customer perception and purchasing behavior immediately, likely impacting revenue in the near term. For example, Delta's introduction of baggage fees initially led to a decline in customer sentiment despite long-term revenue gains.