Southwest Airlines announces they will start charging for bags, stock pops 15% instantly (down from there since then with the broader market), if anyone was wondering why things are still more expensive.
Airlines are gonna airline.
I mean it's just another example of outside money-only buyer comes in, overpays for company, squeezes margins to cover debt they shouldn't have taken on but have to service and meet their IRR, and in doing so they destroy what made the asset attractive in the first place. We studied Southwest in depth once when I was in college and had the CEO come to our honors program for a day before we went and spent a day at their HQ too. Then in Bschool we did a study of them in comparison with JetBlue in the class of the professor who was the Chairman of JetBlue's board at the time.
Southwest was attractive because it was one price, no extra fees. They had a very easy cancellation and movement policy. They had a VERY STRONG culture from the moment you booked until you made it to your destination, throughout the entire experience. It was suuuuuuper customer oriented. They made boarding super easy and faster than everyone ele, allowing for faster turns and a unique through-city strategy where pax could stay on plane...
These things allowed them to price both aggressively AND at a higher margin. So they didn't even have to be "low cost" they were just "low stress" which people basically became ok to pay a premium for...but they ALSO had a lower cost base, so they could beat the other airlines on price AND margin. That's because:
Their fleet was 100% the exact same plane with the exact same configuration, which made pilots and maintenance and other crew in air and on ground) MUCH easier to train, it made parts easier to manage, it made maintenance more predictable and effective (everyone is an expert in the ONE physical asset you use)...so you needed fewer people, AND your company was more enjoyable to work for so you could pay them less.
This idiotic hedge fund is the definition of rent-seeking. What they're doing should be illegal and is an example of one of the very few regulations a market needs to protect it from what is functionally an 80s style corporate raider sucking money and providing no value. The only thing maybe worse here specifically is that poor management put the company in a position for this to happen anyway, so it is perhaps just an acceleration of recent mismanagement that may be tanking the company anyway. The management are the ones who first didn't keep up with tech to maintain a super low and efficient cost base, that dragged heels on a union negotiation and made working there les attractive, that did a poor job navigating COVID, and that tried to jump to a cutting edge plane instead of waiting for a reliable full fleet replacement model.