The real reason – and huge risk – behind Southwest Airlines’ fare sharing on Kayak and Google Flights
Southwest Airlines used to sue anyone who showed flight schedules and fares to their passengers. They wanted their website to be the only source of this information.
Now they’ve allowed Google Flights to show their schedules and prices. And now they’re allowing Kayak to do the same. What’s behind the change?
- Clearly, Southwest Airlines needs more customers. Flights were underbooked and fares were too low. This led to losses and an activist investor trying to oust management.
- But it’s much more than that. Southwest has real problems and is expecting regulatory changes to make their travel more attractive as well.
Southwest Airlines on Google Flights
Apparently, like Enilria Southwest recalls that there was a disagreement with Kayak in the past regarding the disclosure of airfares and that an agreement was reached.
Southwest had a dispute with Kayak years ago that resulted in an agreement to only display flight schedules, not fares. Southwest never sued Kayak or sent a cease-and-desist letter, but there was an understanding that Kayak could not carry fares from Southwest. However, Southwest has sued many other websites that monitor its prices.
Southwest Airlines’ fares are often more expensive than its competitors, but they include two free checked bags. Online travel agency websites that only show flight schedules and prices are not well suited for this comparison.
The federal government has passed new rules requiring anyone displaying flight schedules and prices to make comparisons that include fees like seat charges and checked baggage fees. This would make Southwest appear much more competitive, and they wanted to display their fares side by side online for customers to choose from.
However, the U.S. Court of Appeals for the Fifth Circuit struck down the Department of Transportation’s rule, noting that airlines challenging the rule would have a high probability of success if they could show that the agency exceeded its authority and that they would suffer irreparable harm if the rule went into effect while the challenge was pending. Now, Southwest’s fares don’t look so good on online travel agency websites.
Enilria indicates that Southwest has a problem and urgently needs customers online to see their fares Because in markets where Southwest is not a dominant player, customers don’t think to look at its website.
Even in ATL, they only get about 8% of residents and mostly live off the 12% or so of visitors to stay afloat. In Houston IAH, which they abandoned, they only got about 4% of metropolitan residents while getting 6% of visitors from the rest of their network. That’s astonishing in a city where they should be enjoying the loyalty of nearby Houston HOU, where they have their hub. In a place like New York LGA, it’s even more staggering with about 4% of residents and about 10% of visitors. They had to get that right or they would have hit a wall in capacity growth… and fare growth.
Southwest’s problem is similar to that of Washington Dulles-based Independence Air 20 years ago: The airline launched with some brand recognition in the Washington DC and Northern Virginia markets but nowhere else, and didn’t pay for exposure on other websites. They had four daily flights to Charleston, but no one in either city knew about it!
Image credit: Frank Unterspann via Wikimedia Commons.
They had to send their planes somewhere, they ran a huge operation under the new name Atlantic Coast Airlines (United wanted to reduce the fees they paid for the United Express airline, so they took the foolhardy step of going out on their own), and for as long as they existed, their airfares were dirt cheap to anyone who looked for them.
One day they uploaded their own error fares after midnight, retracted them about an hour later, and then called the Washington Post themselves to say they would honor the fares for the four or so people who had booked tickets (“You never know what a great deal you might find on FlyI.com!”). But no one in the destination cities knew about it—all of their bookings came exclusively from the DC market.
But don’t their prices have to be competitive if they’re on comparison sites? Don’t they have to have the lowest prices and therefore probably economy class? With assigned seats, it becomes easier to offer the assignment only closer to departure. Fares can’t be changed. And they may only include one checked bag instead of two (so Southwest can still advertise “baggage flies free,” which is an important competitive feature).
Of course, if the DOT rule requiring all schedule displays to include prices and fees was expected to go into effect, the company would have already negotiated with Kayak about price display. Price display everywhere makes sense if the goal is more comparability, which is what Southwest expected. Now the future of the rule is uncertain, and it is undermining Southwest’s revised sales strategy to lure customers away from smaller airports.
