Southwest premium fare to offer priority boarding

New guarantee is aimed at increasing number of airline's business customers

November 08, 2007|By Laura McCandlish | Laura McCandlish,SUN REPORTER

In a move to expand its share of business travelers, Southwest Airlines yesterday said it would begin selling a premium fare that guarantees buyers will be among the first to board the plane.

The early boarding privilege will also be extended to passengers who fly at least 32 flights a year on the airline. A round trip counts as two flights.

"We're simply offering business travelers more reasons to choose Southwest," Chief Executive Officer Gary Kelly said. "It will knock down some hurdles and hopefully gain us a lot more passengers."

The business traveler initiative comes as Southwest brings a new boarding procedure today to all its 64 markets, including Baltimore-Washington International Thurgood Marshall Airport.

Passengers will now be issued numbered boarding passes within assigned groups, eliminating the need to jostle for a place in line.

But as oil prices rise and the airline's fuel hedges are expiring, Kelly said the Dallas carrier may have to restrain growth. Southwest expects its annual revenue to grow by at least $100 million with the changes announced yesterday. It's part of an effort to boost revenue by $1 billion a year, Kelly said.

Southwest's new "business select" fare, which will cost $10 to $30 more than regular full fare, includes a free alcoholic beverage, extra Rapid Rewards credit and guarantees travelers will be among those first boarding. Kelly said Southwest will sell 10 percent to 20 percent of the seats on a flight to Business Select customers. The airline's Boeing 737s hold 137 passengers.

Creating the premium fare is part of Southwest Airlines' broader strategy to appeal to both individual and corporate business travelers, said Kevin Mitchell, head of the Business Travel Coalition, a consumer group.

Kelly said that Southwest might be willing to negotiate discounts with corporate travel managers, in what would be another departure for the airline, the largest at BWI.

Southwest also is increasing its presence on the leading global travel reservation systems. Travel agents next week can start purchasing Southwest tickets through the Galileo distribution system that will list the airline's published schedules and fares, with the exception of Internet specials.

In Southwest's established markets, business travelers currently represent about half of Southwest's passengers, company officials said.

But those travelers tend to be from smaller companies and fly shorter trips, said Raymond E. Neidl, an airline analyst with Calyon Securities, which has received compensation from Southwest.

With their international routes and stronger frequent flier programs, legacy airlines are still more attractive to big corporate customers, he said.

"I'm not sure how much success they're going to have on longer-haul flights with the expense account folks," Neidl said. "Getting a free drink and on the plane first - I just don't know if its going to attract enough business people."

Shares of Southwest stock closed down 36 cents at $13.27 yesterday on the New York Stock Exchange.

Southwest passengers who complete at least 32 one-way flights, or 16 round trips, a year will now be automatically checked in for their flight.

The company also announced a new Freedom Award, free of seat restrictions except for a few blackout days around Thanksgiving and Christmas.

Rapid Rewards members must trade in two standard awards for the less-restricted Freedom ticket.

Southwest also instituted a streamlined fare schedule on its Web site today. Instead of numerous categories, fares will be lumped into three columns. business select, business" (the renamed full-fare category) and "wanna get away," which will list all reduced fares to the given destination.

Company officials hope the new services won't alienate leisure travelers and families.

"We're going to have to see what the customer reaction is," Kelly said.

Southwest will announce today additional nonstop flights between a list of existing markets that does not include Baltimore.

A bigger market share with expanded routes could lure more corporate customers, analyst Daniel McKenzie wrote in a report on Southwest's third-quarter earnings.

"A superior schedule naturally attracts business travelers willing to pay more for convenience," wrote McKenzie of Credit Suisse, which does business with Southwest.

Nat Halverson of Millersville flies multiple Southwest flights each week in his job as a salesman for a video intelligence company.

Halverson wouldn't pay the new premium fares for short flights from BWI to Albany, N.Y. or Providence, R.I. (a long stretch, say from Spokane, Wash., to West Palm Beach, Fla., a route he will fly Monday?

"For a flight like that, I would certainly pay an extra $30 to $40 for a guaranteed seat," he said.

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