Can Southwest Airlines Survive? | Bumpy Skies Ahead | 3

0:06I'm David Brown and this is Business Wars.

0:28You know, for a long time, Southwest Airlines was flying high on its reputation. They touted fun-loving flight attendants, a generous free check bag policy, and open seating that kept ticket prices low. But lately, the company's been experiencing some turbulence. The policies that made them not just famous but beloved are going away. In 2025, they announced that they were switching to assigned seating and charging for bags on most fares. And customers were none too happy about that. I literally feel like I was cheated on. I've always had a good experience on Southwest, but this is probably going to make me change my mind with who I'm flying.

1:10They took to Instagram and they posted this. We've made updates to our bag policy and you're still going to love flying with us. And people in the comments are not happy. There is not a single positive comment in these comment sections. All this comes as the company's still regaining trust, or at least trying to, after a system glitch that canceled thousands of flights in December of 2022, leaving nearly 2 million passengers stranded as they headed home for the holidays. So how can Southwest land this plane? Joe Guinto might be able to help. Now, he's no pilot, but he is a business journalist who's covered Southwest Airlines for decades.

1:46You may recognize him as the writer behind Business Wars seasons that include Southwest vs. American and Starbucks Bitter Brew, among others. Joe is joining us today to walk through Southwest's strategy and the rationale behind their recent changes. He's also sharing what it was like to be on the same flight as Southwest CEO Bob Jordan and witness the airline's top dog serving drinks, chatting up customers, and even cleaning the plane. Later on, we're geeking out over all things flying with the aviation queen herself, Benet Wilson. Binet is a reporter at Bankrate covering credit cards, travel, and personal finance.

2:19She has decades of experience covering the aviation industry, hence her title as queen, and is talking with us about the golden age of flying, why today's flight prices feel more expensive than they really are, and the best travel credit cards every frequent flyer needs to know about. So passengers, put away your tray tables, get that seat back in its upright position, and prepare for takeoff, because all that is coming up.

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4:59Joe Guento, welcome to Business Wars. Thanks for having me. You know, we were talking a little bit before we got the tape rolling. You were telling me a little bit about your time in Texas. And I asked you if you happened to have met Herb Kelleher, who was the founder of Southwest Airlines, and was stunned that you said not only did you meet him, you talked to him several times, no? I did. I probably interviewed him formally about a half a dozen times. But my first big story, actually, as a magazine writer, was a profile of Herb Kelleher. and you really couldn't go wrong with him because he did all the heavy lifting.

5:36He was such a great personality that I hardly had to do anything except transcribe what he said. Every description that I've ever read or heard about him sort of sounds like a larger than life figure. When you think of Herb Kelleher, what comes to mind? I think that just the smarts, even though he was very folksy and easy to talk to and would always remember a name and a face, he was just so smart. I mean, he was really strategically brilliant with building that airline. When he took over, I think in 78, it was still a pretty small regional carrier and he got it across the country and he outflanked a lot of bigger rivals with a lot more money, you know, beating United and American at their own game.

6:16sometimes the part where he was great with people was really critical to Southwest's culture. It almost seemed like there were two sides of his personality, right? I mean, on the one hand, he was a very strategic thinker, so much so that, I mean, it's not like he made a lot of enemies in this business, but he sometimes was seen as not necessarily playing by the rules. He would look for his advantage and he'd take it. And yet he really did have this sincere feeling about how successful businesses can only really thrive if the employees feel like they have a stake in a successful outcome. That was really, you know, you hear a lot of people talk like that, but he really felt that.

7:03Was that your sense? Yeah, absolutely. He must've said probably every time I ever talked to him, that employees came first. At Southwest, that was their differentiator. He basically would say, you know, any other airline can go out and get the same 737s that we fly, but they can't get our people. And for Southwest, it was employees first for Herb, and it was customers second. If you take care of your employees, they'll take care of your customers. And if the customers are happy, that will make the shareholders happy. That was the philosophy that he always operated by. And it certainly showed up in the results.

7:36They had to many consecutive, not just years, but decades in the black. He encouraged employees to kind of build that culture. I mean, they called it the Love Airline, not just because of the cuddly imagery, but because they operated out of Dallas Love Field, which gave it a kind of competitive advantage, certainly back when it was first getting started with the other carriers were operating out of busy DFW, Dallas-Fort Worth. you know, Southwest always felt like, especially if you were in Texas, like it was homegrown, like there was something really organic about it, like these folks on the plane, they were sort of your neighbors.

8:14And it's funny how he really leaned into that Texas, that Texan-ness, I think, certainly early in Southwest's days, don't you think? Yeah, absolutely. There are a lot of people who think Herb was a Texan. He was actually from New Jersey. But once he got himself on the ground there, he got his boots on the ground there in Texas, he really fit right into the culture. And with Southwest, he became sort of the pitch man for many years. So he was in the TV commercials. He was in the print ads. People got to know him personally, at least they felt they did, when they were customers, because he was trying to personify really the image that Southwest was trying to put out there, which was, You can just come with us and hang out and get on this plane and fly it for fun if you want to, because we're always going to get you there.

9:00I know you interviewed another key figure in our series on Southwest, CEO Bob Jordan. What was he like? He's certainly not Herb, but nor would he pretend to be. But overall, Bob is very nice and he fits very much into the Southwest mold. He's been there for three decades himself. And he was there in Herb's day and got to spend enough time with Herb, I think, where at least a little of Herb's personality rubbed off on him. I want to know if I heard this story correctly. What I heard, you were just on a Southwest flight and you bumped into Bob Jordan? Yeah, I got on a flight on June 18th, it was, which happens to be the 54th anniversary of Southwest's first flight.

9:43And I probably was one of the very few passengers on there who knew that fact before I got on. and I got on. I had just actually completed work on this series about Southwest Airlines for Business Wars, and Southwest was very much in my mind, and then I look up the front of the plane. I'd gotten on pretty early, and I see a guy who looks exactly like Bob Jordan, and I thought, wow, I'm hallucinating. I've been writing about Southwest so much that I don't even know what's what, and then I looked at him a little longer. I realized he was wearing a lanyard that said Southwest Airlines and it really was him.

10:19So I was pleasantly surprised that I wasn't imagining things. Did you go up and say hello or introduce yourself? He got on pretty late. So I kind of, I waited till the end of the flight. During the flight, as Herb used to do, he passed out snacks and afterwards, you know, he came out around with the trash bag and he picked up the trash. And when I got off, I kind of waited for him in the jet bridge and I had to wait there almost a half an hour because as I found out from all the flight attendants who had been taking pictures with him and getting autographs, apparently Bob decided he was going to clean up the whole plane for them.

10:52You are kidding. Yeah. He cleaned up the plane and he put the seatbelts back where they're supposed to be and the whole thing. So, yeah. Let me ask you, do you think that that was sort of the boss being, you know, sometimes a high profile boss might want to do something to sort of show his solidarity with workers and that kind of thing? Or do you think this is kind of coming from some other place with him? It's very much a Southwest tradition. For all the changes that Southwest has gone through in the past, probably five or six years now, it's still hardwired into its past. They still have a lot of respect for the Herb Kelleher days.

11:26And that is 100 % something Herb would have done is pick up a plane or talk to flight attendants for so long that he might have even delayed a flight. And so I think Bob was very much trying to fit that mold. And so it probably comes natural from him from being there for so long. When was the first time you flew Southwest? Do you remember? I do. It was, I was on my way to get engaged. I took a flight to San Antonio on a very old Southwest 737. It might've been a 200 model. Aren't they all Southwest 737s? You'd sort of have to go know the minutia, the 200 model, that sort of thing. Right. This model was the kind, they used to call them, I think, party seats or business seats, and they had seats that would face each other.

12:12So in the front and in the middle. Yes, exactly. Yeah, it was sort of like train seating. You'd be sitting across from somebody who'd have their boots up in your lap there. That's right. Facing you, right. Yeah, and my fiancé and I, we sat facing backwards, and we happened to be sitting across from a couple. It was a somewhat older woman and a younger man. We assume they were mother and son. And about 15 minutes after takeoff, they started to make out. So I guess they weren't. That's so funny. So that would have been what, in the 80s maybe? That was in the late 90s. Late 90s. Okay. I didn't realize that they were flying those backward seats that late.

12:55Probably one of its last flights. Yeah. Yeah. But that says something about how traditions sort of die hard in Texas. its reputation though as a kind of bus of the skies I never thought of it in a sort of negative sense I always thought of Southwest as being a kind of place where if you needed to hop a plane because you needed to get to anywhere in Texas and you got to think Texas is the size of France right so if you need to get to I don't know from Dallas to Houston and this was especially true in the pre-TSA days, you would just book a ticket real fast, wouldn't cost you very much. And you could just catch that bus of the skies and you'd be off to wherever you were.

13:37And then there you'd be. It kind of made Texas feel a whole lot smaller. And in a sense, you know, that sort of solidified that bond that a lot of folks had with Southwest is sort of like, this is my personal airline in a way. Yeah, that's right. I think that's one of the reasons why Herb is in the Texas Business Hall of Fame. Southwest literally made that state feel smaller. And that is exactly how it worked. You go up to the ticket counter, they had cash registers, literal cash registers, and they would print out a ticket. At some point, they had to start stamping, this is a ticket on the back of the receipt because people would just throw them away, not realizing that was their boarding pass.

14:18And of course, today, Southwest is experiencing a major cultural shift. A lot of decades old policies are getting upended. Joe, walk us through some of these changes. Oh yeah, absolutely. I think the first one that came was they ended the open seating. I think that actually formally kicks off in January of 2026, but they announced it late in 2024. And it was a shock to a lot of people because they thought, well, Southwest has always had open seating. It's always going to have open seating. But the fact was Southwest was a little bit behind on this. They had surveyed their customers a decade ago and customers wanted the open seating to stay, but they hadn't really done a massive survey since then.

15:00And when they did, they found out that about 80 % of the people who fly the airline would prefer to have an assigned seat. And they've also found out more than that, about 86 % of the people who chose not to fly on Southwest did it because they wanted an assigned seat and they were willing to go somewhere else to get one. They're getting a lot of blowback online too. I think we have a couple of TikToks that sort of bear that out. If you remember the Wanna Get Away fairs, those are no more. They're basic now. And boy, are they basic. This is frontier, but expensive. This is spirit on steroids. I've always had a good experience on Southwest, but this is probably going to make me change my mind with who I'm flying just because there's not going to be a real price discrepancy anymore.

15:46You know, Joe, you can't help but think that someone like Bob Jordan wasn't expecting that there would be blowback. I don't know if he expected it to be this severe, but why implement these changes in the first place? Well, I guess if you ask Bob, his answer would be that the customers wanted this change, at least where it came to open seating. They wanted to be able to get the assigned seat. But when you talk about bags fly free, which is something that they ended just a few months after they announced that they were going to end open seating, that was something that it's harder to make a case for the fact that customers wanted it.

16:23You definitely saw a lot of that stuff online where customers were saying, we would prefer the bags fly free. And it was one of the main reasons why we chose to fly on Southwest in the first place. Southwest even did its own internal study, and they found out that they would make about$1.5 billion a year if they charge for bags. But they also found out that they would lose$1.8 billion a year in customers leaving them for some other airline because they were angry with Southwest. So almost a wash, it sounds like. Yeah, yeah. Apparently, the board of directors didn't see eye to eye with that survey.

16:59They felt maybe the numbers were not right. And they've decided to give it a shot and see. We'll find out. It'll take probably about a year for us to know. But we'll know pretty soon. Well, I guess the question that was raised by one of those comments on TikTok, is it in fact becoming a kind of pricier Spirit Airlines? I mean, it's not a Spirit. It does more than Spirit or Frontier do, and it certainly has resisted charging for every little thing. But I'm sort of wondering if Southwest's low-cost model is now a piece of aviation history, maybe. What do you think? Well, I think if you put that question to the current CEO of United Airlines, he would say, yes, it's dead.

17:42In fact, that is exactly what he said just about a month ago. What are your thoughts on the budget airline model? It's dead. Like, it's a crappy model. He said that the low-cost model, the Spirit Airlines-type model, the frontiers, they're not going to be able to succeed anymore. And his belief is because the legacy carriers, the Uniteds, the Americans, the Deltas, change what they do so much to try and match with basic economy fares. They've tried to match the low-cost carriers on fares, but they also can offer a premium product to the people who are willing to pay for it, which happens to be right now more of the flyers than less.

18:24So it is possible that Southwest's old way of operating had to change or else they too would find themselves where Eastern Airlines and all the rest of the airlines Southwest once helped put out of business. They might find themselves in the scrapyard. Our guest is Joe Guinto. He's the writer of our Business Wars series on Southwest. And when we come back, we're going to take a closer look at some of Southwest's more recent faux pas and what other changes might be in store. Stay with us.

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21:35Hey, welcome back to Business Wars. Joe Guento is a business journalist who's covered Southwest Airlines for decades. In fact, he wrote our Business Wars season covering this company. We were talking a little earlier about what made Southwest so different. One of the real differences was it had a kind of a nontraditional route structure compared to other airlines. Could you say a little bit more about that and what's happened to Southwest in more recent years? Yeah, it was pretty easy to understand in the beginning days. You know, at first they flew just three cities. They flew from Dallas to San Antonio, from Dallas to Houston, and then back.

22:13That was point-to-point service. It was one city to another. As they got a little bit bigger, they would fly. Still that kind of idea, but now you're flying from, say, Dallas to New Orleans or eventually Dallas to Los Angeles. They didn't have hubs in the sense that the major airlines do, the Americans and Deltas, where American has the big hub in Dallas and Delta has a big hub in Atlanta. And the idea there is they have a bunch of pilots, they have a bunch of planes, they route all kinds of passengers from smaller communities through those big communities and then out to the rest of the country.

22:48There are advantages and disadvantages to both of those networks. And I think as you've seen over time, as Southwest has gotten bigger across the country, they operate a little bit more like a hub and spoke than they used to, but they still don't have those massive, we're going to feed everybody through Chicago kind of hub. You know, maybe this opens up a whole can of worms when it comes to what happened a few Christmases ago. And I think a lot of listeners know exactly what I'm talking about. Because, of course, Southwest for years relied on what have been euphemistically described as legacy scheduling systems that a lot of some of the older carriers, legacy carriers, gave up a long time ago.

23:35So why did Southwest hold on to it? Because they just didn't need to upgrade those scheduling systems? Yeah, I think they felt like they would upgrade them sooner or later, but it became later and that became the problem. They were hearing internal voices inside the company from their flight attendants, from their pilots that, hey, our scheduling systems are leaving us behind. We're having trouble getting rerouted when, you know, there's a flight cancellation and we need as a crew, we need to go to another city and pick up a different flight. They were having problems well before the meltdown that happened in December 2022 around Christmas.

24:12And they just, they kind of waited a little bit too long to invest in change, even though they were hearing from all those internal voices in the company that were basically clamoring for it and saying, we're just one big storm system away from the whole network falling over. And that is exactly what happened in Christmas of 2022. You just mentioned a central point here that their flight attendants, pilots, had been mentioning that we got to do something about this. And when there was that huge meltdown at Christmas of 2022, the holiday flights meltdown, I think a lot of Southwest employees who, again, traditionally had felt very much attached to the company, You could tell in some of their comments that they felt that the company was not paying attention to what they were experiencing firsthand.

25:03Do you think that's accurate? Yeah, for sure. Back in the day, Herb Keller, Herb would hang out with the pilots and they'd all go drinking bourbon together. And, you know, they had a very familiar kind of relationship. And as Southwest kind of got bigger and maybe you could say they got more professional if you wanted to make that argument. some of that went away. And what happened in December 22 was something that the pilots and the flight attendants had been warning about for several years. And those years happened to coincide with the pilots and flight attendants also not having contracts. They were negotiating new contracts.