It’s tough times for the airline industry. Amid increased competition and a surge in ultra-low cost carriers, it takes some big brass ones to raise prices right now. But, that’s just what Southwest have done, with prices already inflated on many routes and more due to increase soon.
Southwest Airlines say they are preparing for price pressures throughout 2019 and 2020, shuffling operations to increase efficiency and revenue. According to the airline, they are still trimming the 2019 budget as well as working on a ‘fairly significant initiative’ to boost profits.
How much are fares increasing?
So, before you go cancelling all your travel plans for 2019, let’s put this in perspective. Southwest are increasing their prices by between $2 and $5 each way. That’s not really an amount to get excited about, but it is telling of the coming trends in the aviation industry.
Fuel prices rose by the equivalent of 40% in less than a year, which has seen many carriers scaling back expansion plans and raising fares or other costs. Despite a recent drop in the price of crude oil, carriers are still preparing for the worst.
Why are they increasing?
CEO at Southwest, Gary Kelly, has set a target of increasing the airline’s revenue by around 3% in 2019. Shared among all ticket holders, this equates to around $5 per one way flight per person. The reason for this was cited by Kelly as an ‘unexpected jump’ in expenses, requiring immediate action to rein in and retain profitability in the coming years.
The airline has been investing in technology upgrades as well as new fleet and better airport facilities. However, despite being financially healthy, the carrier has been forced to keep a lid on air fare prices due to the rapid rise of very low cost carriers in the US market.
Although employee related costs are the biggest expense at the airline, Kelly has confirmed they will not be offering early retirement or a buyout program to workers. He commented,
“We’re not in a panic. We’re not in a crisis. Financially, we’ve never been stronger. We’re all very enthused about 2019.”
What else is going on?
Southwest have also said they plan to limit their participation in fare wars. In the past we’ve seen some killer deals from this carrier, but perhaps that golden age of dirt cheap travel is drawing to a close.
Instead, Southwest may become the moral compass for fair fare pricing. After all, I’m sure we’d all rather pay an additional couple of dollars per flight than see any more airlines go out of business.
As a result, we fully expect to see other airline price increases over the course of 2019, which in some ways is fair and necessary given the predictions for rising jet fuel prices. In the past, aggressively low prices from Southwest have seen the other US legacy carriers struggling to compete, but a focus on profitability should make 2019 a smoother year for them.
Despite the increased fares, Southwest remain an attractive airline to travel with, thanks to the many perks included with the flights. Just some of these are:
- Two checked bags for free
- Change of cancel your flights up to 10 minutes before take-off
- Their Companion Pass, which allows you to bring a travel buddy every time you fly
- Generous points accumulation on their Rapid Rewards credit cards
While we’ll all be sad to see the demise of the generous Southwest sales, the carrier will almost certainly remain the first choice for many discerning travellers. Particularly when they add Hawaii to their list of destinations in the new year.