Southwest Airlines built a well-defined and well-understood reputation in what had become an otherwise tumultuous airline industry. It was a model of consistency and catered to the modest needs of budget-conscious travelers. The market responded well. In a recent financial publication, one industry analyst noted that “Southwest Airlines’s financial strength is reflected in its exceptional net margin, which exceeds industry averages. With a remarkable net margin of 3.84%, the company showcases strong profitability and effective cost management.” 

Late last year, cracks began to show. As the NYTimes put it, “Southwest was so successful for so long that it grew complacent, resisting strategies that other airlines have used effectively to increase profits and win over travelers, like offering more premium seats and services.” Well, no more. 

Facing “intense investor pressure” from investors to maintain as least if not improve its revenue at a time of industry turmoil, Southwest took a pages, well, pages, from other airlines. First it ended it open-seating policy, started offering red-eye flights and differentiated between regular and premium seats.

Through it all, Southwest held tightly to it longest standing offer – two bags fly free. Then, this year, that went, too. The goal was to drive passengers to the Southwest affinity credit card (a long-time money maker) by offering members a free bag. The problem, as if often the case, is that decisions made to boost revenue undercut passengers’ mood and damaged the company’s reputation.

Competitors see the turbulence. Again, from the NYTimes, “When Glen Hauenstein, the president of Delta Air Lines, was asked at an investor conference on Tuesday about whether the shift would benefit other carriers, he said: ‘Clearly, there are some customers who chose them for that, and now those customers are up for grabs. We’ll see how that plays out.’” 

For some, the verdict is already in. Academic and investor Scott Galloway thinks “Southwest just traded it soul”. This view is fast becoming conventional wisdom. The industry website, Crankyflier.com, put the effect of the bag policy change this way:

“When we look back in the distant future, I think we’ll remember today as the day that Southwest died. No, it is not going out of business, but its entire value proposition — everything that made it different — has disappeared…” 

Take it from a self-described devoted Southwest flier Howie Baker. “Why would will still fly Southwest, because now they’re just going to be same as every other flight.”