Southwest Airlines challenged on its low-cost claims

Some words have no legal definition even if most consumers take an "I know it when I see it" approach. 

You can call your company "low cost" or "discount" and that can mean very different things. 

For someone who shops at high-end retailers, Macy's may seem like a value brand (although the company does not make that claim). Or a regular Dillard's shopper might see Marshalls, Bealls and other retailers that market based on offering low prices as the low-cost or discount brands.   

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When it comes to airlines it becomes even more confusing. Many full-fare airlines have higher prices and charge for "extras" like checked bags and onboard WiFi.

The lowest-cost carriers — Spirit (SAVE) , Frontier, Allegiant and similar players — market themselves as low-cost, but they are really a la carte. Passengers pay little for their tickets, but they pay extra for everything from carry-on bags to checked luggage and even getting an actual seat assignment.

Southwest Airlines (LUV) , which considers itself a discount carrier, has always operated differently from its rivals at both ends of the pricing spectrum. The airline's fares are generally cheaper than traditional airlines like United, Delta and American, but they cost more than Spirit, Frontier and Allegiant.

In addition, Southwest included carry-on and checked bags in your ticket price, so it's offering added value in that way as well. Ryanair Chief Executive Michael O’Leary, a longtime supporter of Southwest, no longer sees the company as a low-cost carrier.

Ryanair CEO makes Southwest Airlines claims

Southwest clearly defines its "purpose" on its website: "To connect people to what's important in their lives through friendly, reliable, and low-cost air travel." 

At the top of its "About Us" page, the airline also touts its "one-of-a-kind value."

O’Leary does not see it that way.

“Southwest’s average fare in the last decade has crept up – their average last year was $170 a seat. That’s not a particularly cheap airline. Our average airfare in Europe was €44 [$47] a seat. I don’t think Southwest is really a low-fares airline anymore,” he told Skift.

Ryanair's CEO says Southwest is causing itself problems by not charging for checked bags. He noted that his airline saw its rate of passengers who check bags drop to 20% from 80% once it started charging for the privilege.

“And yet at Southwest, you go through American airports and people are carrying on five bags, checking in five bags. The whole process is delayed," he said. "They put out all this schlock about ‘our passengers are our guests, and you wouldn’t want to charge your guests for their bags,’ but why do you charge for the seats if that’s the case? Give it all away for free.” 

Southwest allows two free checked bags per passenger.

O'Leary took one parting shot at the airline he studied when building Ryanair: “Southwest has lost the passion for low-cost, low-fare air travel.” 

Data show Ryanair's O'Leary may have a point

While 2022 may have been an abnormal year as airlines and the overall economy recovered from the covid pandemic, a study of airline revenue per seat mile conducted by Flight Advisor was not favorable to Southwest. 

"Although Southwest Airlines is technically the world’s largest low-cost carrier, the airline’s total revenue per seat mile is the highest on our list at $0.1729," wrote Amy Lancelotte. "This isn’t much more than Delta, but travelers who think that Southwest offers the lowest prices are in for a surprise. This brings forth the question of whether Southwest should even be considered a budget carrier."

Spirit, Frontier and Allegiant, in that order, had the lowest revenue per seat mile. 

A similar report by LendEdu, done in May 2023, also ranked Southwest as the most expensive of the major U.S. airlines on a cost-per-mile basis.