For 36 years, Southwest Airlines built a successful business on a fundamental idea: No passenger was more important than any other.
On Wednesday, it took a sledgehammer to that premise in what may be one of the more riskier changes in strategy in recent airline history. The Dallas-based carrier will move higher-paying corporate customers to the head of the line, creating a new class of customer who will pay more and get more.
Beginning Thursday, those paying new Business Select fares, priced between $10 and $35 above its regular non-refundable tickets, will be guaranteed a spot among the first passengers to board the plane, double frequent-flier credit for trips over 750 miles and a free cocktail in the air.
It's a major repositioning for Southwest, long known for its low fares, lack of frills and populist approach to customers.
"There is a culture that goes with Southwest that's a little bit of 'everybody for themselves,' or 'we're all in this together,' depending on your mood," said Carly Cannell, who as president of Weetu Corp., a Chicago commercial design firm, flies about 25 round trips annually on Southwest. "It's definitely going to change it. Then, you have the front of the bus and the back of the bus."
Southwest hopes to gain a bigger share of the lucrative business-travel market long dominated by Chicago's United Airlines, Ft. Worth-based American Airlines and other major carriers. Southwest expects to gain at least $100 million in annual revenue as a result of the push, which is part of a broader plan to add new products that generate $1 billion in additional sales by 2009, Southwest Chief Executive Gary Kelly told reporters Wednesday.
"It's a time of change," said aviation consultant Robert Mann. "Obviously, change is always uncomfortable, but it's necessary."
Mann was referring to the risk that the carrier will alienate its legion of die-hard customers who are loyal to Southwest as much for its egalitarian culture as its low fares, analysts said. In fact, when Wal-Mart tried hard to attract a more upscale customer, the retailing giant found that moving too quickly confused its core customer base, leading to a spate of lackluster monthly sales reports.
Luring a new class of customers is no guarantee either. Since Southwest still offers open seating and only one class of service, the airline may have difficulty getting prized travelers like headhunter William Baker, who enjoys perks like free upgrades to first class as a Platinum member of American's frequent-flier program.
"I like knowing in advance where I'm going to sit, and I like being able to upgrade," said Baker, partner and president of Baker Montgomery, a Chicago-based executive search firm. "There is no such thing as an upgrade on Southwest."
And Southwest will face significant competitive pressure from the likes of United and American.
"We compete vigorously everywhere we fly," said Jean Medina, a spokeswoman for United. "And we look forward to taking our customers to the hundreds of destinations that they don't fly."
Where it does fly, however, Southwest will try to attract higher-paying passengers by doing more than just moving them up in line. For example, the carrier will also hold places in its A boarding line for frequent fliers who log at least 32 flights per year on the carrier or purchase 16 round-trip tickets, a move that will ensure they have prime seats.
"Those folks are our true road warriors," Kelly said.
However, Southwest plans to limit the number of Business Select fares offered on its flights so that other travelers also have a chance to be part of its first boarding group.
Instead of boarding before other passengers, families traveling with small children will board between the A and B groups, which still should give them choice picks among the two-thirds of the seats still available on every flight.
On Nov. 19, Southwest plans to upgrade its boarding areas at Midway Airport to include such business-friendly amenities as plush seating and Internet connections. Southwest plans to revamp all of its airport gates nationwide as well.
The carrier is overhauling its Web site to reflect the new push. As of Thursday, Southwest will drop the simple grid that it has used for the past year to show the range of prices available on any day to a given destination.
Instead, prices will be clumped into three categories: Business Select; Business, which is equivalent to Southwest's current refundable fares; and Wanna Get Away, which will show customers the best deals available to a given destination.
Southwest also has upgraded a link that makes it easy for bargain hunters to find the lowest fares within a month of their preferred travel date.
While Southwest is known for innovation, it may have difficulty retooling a model custom-made for leisure travel. For starters, the carrier doesn't have any presence at major airports in business centers like New York, Boston and Washington, or an international network.
"They're constrained by their model," said Roger King, airline analyst with CreditSights Inc.
But Southwest, which has the best on-time performance of any large airline, should pick up some business customers sick of dealing with delays and deep capacity cuts at traditional airlines, said Mann.
"They grow right into that void. They've done that very, very well," he said.
However, Southwest appears to be moving away from one tradition -- transparent pricing. It plans to move to 15 fare classes from eight, adding far greater differences in its pricing.
And it risks alienating longtime passengers by retreating from another of its tenets: treating all customers as equals.
"We're a classless society at Southwest, where title don't matter and we welcome all customers," Kelly insisted.
