Nov 7, 2007 3:35 pm US/Central
Southwest Creates New 'Business Select' Fares
DALLAS (AP) ―
Southwest Airlines Co. said Wednesday it would offer elite business travelers the chance to pay higher fares to board sooner and get frequent-flier bonuses and a cocktail.
The airline hopes the new "business select" fares will raise more than $100 million next year, but Southwest might still curtail growth again as it grapples with rising fuel prices.
Chief Executive Gary Kelly said Southwest, which cut its growth in June, is considering another reduction in expansion plans that call for adding 19 planes next year.
Kelly said he didn't know how much Southwest might slow its growth, which was 5.3 percent in October.
"I don't think we would go to zero growth," Kelly said. Any further reductions in flights probably won't occur until at least May, he added.
Airlines are grappling with higher fuel costs. Even though Southwest has options to buy fuel at below-market rates, rising fuel costs are making it harder for the Dallas-based carrier to hit its goal of increasing revenue and cutting costs by a combined $1 billion a year.
Airlines have been raising fares in recent years, but rampant discounts have resulted in fewer passengers paying full price.
In the late 1990s, about 40 percent of Southwest passengers paid full fare, but that's down to 25 percent now, Kelly said. He hopes to stop that slide and sell some seats at the new, higher "business-select" prices.
Business-select passengers will pay $10 to $30 more per flight than Southwest's current top fares, Kelly said. The airline plans to set aside about 10 percent of seats for the new category.
Kelly said Southwest didn't test the higher fares for a better shot at boarding early, but did survey frequent travelers, and the trade-off "is something we think customers will highly value."
Customers will have the option of paying current walk-up fares, a category called simply "business," and cheaper but more restricted fares called "Wanna Get Away" and aimed at leisure travelers.
Business travelers are generally less sensitive to price, so they often pay more than leisure travelers. Attracting business travelers is important to Southwest, which is looking for ways to offset rising fuel costs.
Southwest has long resisted corporate discounts, which many other airlines negotiate one at a time with their biggest customers.
The strategy for chasing business travelers was announced one day before Southwest rolls out its new boarding process nationwide. Travelers will be assigned spots in line instead of being herded into three large boarding groups.
The airline is also updating its gates at more than 60 airports, a project that will cost upward of $40 million.
Shares of Southwest fell 23 cents, or 1.7 percent, to $13.40 in afternoon trading. Airline stocks have been hurt by rising oil prices, which translate into higher fuel expenses.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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