For years, people felt confident booking Southwest Airlines tickets because they had no change fees. If their plans didn’t work out, they could use their entire purchase price as a credit towards a new ticket.
United Airlines CEO Scott Kirby said that this was an advantage that lost him a lot of business at America West, US Airways, and American Airlines. He always wanted to copy it, but couldn’t do so until he became the actual CEO of an airline.
So during the pandemic, Kirby made the change. He dropped change fees at United, and competitors quickly matched. And Southwest Airlines did something interesting to maintain their edge. While everyone else’s travel credits expired, Southwest eliminated expiration of credits.
- They said this wouldn’t actually be that costly to them. There’d be an accounting hit initially, but after that it wouldn’t be material.
- And it would win them a lot of business. Even the occasional travel – who might not be confident of using a travel credit within 12 months – would have confidence booking from them. It was a competitive advantage.
But Southwest’s financial performance deteriorated. They’re still making money, just not as much. They got an activist investor, who appointed industry veterans to their board. And they voted to walk away from everything that made them different and special. To name just a few:
- Their culture
- The value of their frequent flyer points
- Their small-d democratic seating and boarding
- Not to mention a long-term investment branding ‘bags fly free’
Southwest is also dropping the policy that travel credits don’t expire. Effective with tickets purchased (or changed) May 28, 2025, travel credits expire 12 months from date of original ticket purchase. Travel credits from basic economy fares expire 6 months from date of original ticket purchase.
And this creates a pretty absurd scenario. Basic economy is a way to segment price-sensitive leisure travelers from business travelers spending someone else’s money. That way an airline can discount and fill seats, without selling tickets for less to customers that are willing to spend more. Those price sensitive travelers tend to buy their tickets further in advance, too (in fact the old way of doing this was advance purchase requirements and Saturday night stays).
Someone buying a basic economy ticket far in advance, and cancelling travel six months later, will literally receive no credit at all. The validity of the credit is based on when you buy the ticket, not when you cancel travel and get a credit.
They went from credits never expire, to some customers are simply out of luck and get nothing. Because Southwest Airlines stopped caring – not just stopped caring about their customers, but stopped caring about differentiating themselves, offering a unique value proposition, in order to earn a product.
They’ve just given up. They know these changes are money-losers for them, but they’re going along with a milquetoast board to save their own jobs. And that’s just sad.
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