Southwest says fares are down despite rising fuel costs

Bart Jansen
Ramp workers prepare a Southwest Airlines Boeing 737 for departure July 17, 2018, to Denver from Minneapolis International Airport in Minneapolis.

As airlines cope with higher fuel costs, Southwest Airlines executives said Thursday in contrast to their rivals that they haven’t raised fares. And they don’t contemplate charging for bags or flight changes, either.

American Airlines, Delta Air Lines and United Airlines all have reported this month that their fuel costs are up as much as 40 percent, potentially costing each carrier $2 billion this year that the airlines say they'll try to offset at least partially with higher fares.

At Southwest, the fuel cost was up 12 percent -- or about $241 million -- during the first half of the year, after the company hedged against some of the price hike.

But executives said the benefits of a federal tax overhaul in 2017 were enough to offset higher fuel costs. Average fares dropped 4.4 percent during the quarter, part of a steady decline since 2014, according to CEO Gary Kelly.

“We didn’t sock it to our customers,” Kelly told investment analysts and reporters on an earnings call. “We are America’s low fare leader.”


The airline is starting to study new revenue options for beyond 2019. But in response to repeated questions, Kelly said they aren’t looking immediately at starting to charge for checked bags, for changing flights or for assigned seats.

“We are not looking at assigning seats right now,” Kelly said. “We are not talking about assigning seats. We are not talking about looking at it in the future.”

While some customers demand assigned seating, Southwest studied the options with passengers in San Diego more than a decade ago and developed a new method for boarding. Without assigning seats.

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A new reservation system would allow the option, but don’t count on it, executives told analysts.

“It ain’t happening now,” Kelly said. “And it won’t happen next year.”

Neither will bag fees or flight-change fees.

“We are not thinking about bag fees,” Kelly said. “We are not thinking about change fees.”

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