
Pure Genius: Southwest Airlines Baggage Strategy - cwan
http://www.freightdawg.com/2010/03/pure-genius-southwest-airlines-baggage-strategy.html
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JunkDNA
This article is pretty interesting. One point he makes is one that I have long
wondered about: why on earth do airlines not treat baggage the same way UPS
and FedEx treat packages?

Going one step further, I'm not sure what the logistics would be, but I wonder
if the airlines could sub-contract baggage to people like UPS and FedEx. One
of my big fears traveling is that my bag is going to disappear for days on end
in the system. If UPS was willing to guarantee hotel delivery for my stuff by
8PM on my arrival day, I might take it, even if I had to pay.

~~~
wallflower
FedEx and UPS have a vastly simpler model for package distribution compared to
airline baggage distribution. Everything goes to a central hub and is
consolidated and sent out directly to the regional distrbution center.

<http://en.wikipedia.org/wiki/Spoke-hub_distribution_paradigm>

<http://en.wikipedia.org/wiki/Worldport_(UPS_air_hub)>

~~~
jrockway
So do passengers, except on Southwest. If you fly American, you will become
very familiar with ORD or DFW. If you fly Delta, you will become very familiar
with ATL. If you fly USAir, you will become very familiar with PHX or CLT.
Etc.

Even Southwest tends to try to funnel passengers through focus cities like
MDW, but their network is largely point-to-point.

If hub-and-spoke is what would make baggage distribution efficient, WN should
be the least efficient.

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wallflower
Yes, I was fascinated when I learned that they have to fly all the planes back
at the end of the day to the ORD hub so they can be ready for the next day of
flights. Which means when planes are delayed and they can't make it back to
the mother hub - it puts strain on their system.

~~~
jrockway
American? I know for a fact that they don't do this; I often fly the 6:10am
flight out of PHX, and the plane for that flight sits at PHX overnight.

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wallflower
You're right. A better answer (types of planes, types of routes, lions,
tigers, bears, oh my!)

<http://www.answerbag.com/q_view/607944>

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rmc
Sound like how Ryanair (a Europe airline) work. They are one of the largest
airlines in the world. They charge €20 per checked in bag. And since you can't
check in online with a bag, you need to pay €20 to use a check in desk. When a
flight is advertised for €15, all these extra charges all add up.

Of course most people think it's just Ryanair being mean and will complain
about how they "were stung for extra charges". However, despite people's
complaints, they are by far the lowest prices, and people fly with them.

I think Ryanair based a lot of their idea on southwest airlines in the USA.

~~~
kljhgfvgbn
Almost, easyjet and then Ryanair copied the single type, low prices and short
routes idea of SouthWestern.

What they forgot to copy was the honest price, no fees policy and the
extremely helpful and friendly staff of SWA and the Canadian equivalent
Westjet.

What Ryan did was take the SWA idea of being profitable and added the fee
structure scams of every major airline and the customer management skills of a
Soviet era railway.

~~~
seanos
Actually I would say that Ryanair is the opposite model. They want to
_discourage_ people from checking in baggage, hence the fees. Staffing check-
in desks and paying for baggage handling is a cost to the airline and
increases turn around times as bags have to me moved on and off the aircraft.
The difference is that Ryanair passengers are not, generally, making
connecting flights at their destination at least not with Ryanair. They are
flying straight to their destination, removing the advantages of checked
baggage that exist for Southwest.

As for the fees, that is a feature not a bug. It means that people who want to
fly as cheaply as possible can (no frills) and those who want the extras such
as checked baggage pay. With a no fee structure, essentially the people who
don't check baggage, check in online instead of at a desk, don't care where
they sit (and speed up boarding times) etc are subsidising those that use
those extras.

~~~
kljhgfvgbn
The point of the SWA article though, is that airlines don't seem to realise
that people carrying masses of carry-on onto the plane slow down the
boarding/exiting so much they delay the flight and cost far more money than
handling bags would.

Also it isn't the baggage fees with Ryanair so much as the price you pay is
completely unrelated to the advertised $1 price for the flight. You can only
find all the taxes and fees once you have completed the booking - they have
even sued external price compare sites which show you the full price. They are
constantly being investigated for this under various Eu consumer laws.

~~~
baltoo
I've flown Ryanair several times and they routinely stop people from boarding
with masses of carry-on. Really, if have a lot of stuff they'll tell you to go
back to check-in and handle it there.

This truly seems to cost both aggravation and time - but perhaps only for the
first time. I'd hazard a guess that only a few people, of each Ryanair flight,
are rookies. Most people, when faced with harsh measures, really do learn
quickly. Perhaps this is, overall and long-term, a cost efficient way to do
business.

~~~
rmc
Yes, Ryanair are _very_ strict with size and number of items. You are only
allowed one bag. That includes handbag. Many times I've seen women not allowed
on until they get their handbag in their normal bag and both have to fit
within the size.

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dhyasama
Transferring bags between identical planes will decrease risk but it won't
eliminate it. Unless the same people are transferring (and hence the same
bags) then the number and size of bags is going to change.

Presumably people are transferring to the new plane from many different
flights, flights have varying numbers of people, people have varying numbers
of bags, and bags vary in size.

For example, a few flights into Miami may be only 1/4 full of people but they
are 1/2 full of bags because the Miami flyers tend to carry large gear such as
golf clubs and scuba gear. If you transfer those people onto a flight to the
Bahamas, along with a few folks from other flights, then you might run into a
problem.

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mhb
Maybe it's marketing genius, but I don't understand some of his reasoning.

Obviously all the airlines don't want anyone carrying bags on the plane. Why
is having a consistent load factor an enabler for Southwest to fly checked
bags for free? Why does it matter that the bags are being moved between the
same types of aircraft?

You could equally well imagine the argument that it makes sense to use an
"agile" strategy in which aircraft with different load factors are deployed
based on the type of travel expected.

I'm sure having only one aircraft and picking routes for which that aircraft
is suitable has tons of benefits for Southwest, but his blog doesn't explain
why that is an enabler for the free checked bag policy (other than creating
efficiencies which generate enough profit to offer any perks). Would it be
"marketing genius" to offer free meals on planes?

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gyardley
He explained it in the paragraph that starts with "Other airlines either don't
get it, or can't" - different-sized planes accomodate different amounts of
luggage per passenger, so there's a risk that they'll run out of room for all
the baggage when passengers transfer to smaller planes. Identical planes
eliminate this risk.

I didn't realize that when your luggage is 'lost' on a multi-stop flight, it
could actually be a deliberate decision on the part of the airline due to lack
of capacity. I'd actually rather they told me that.

~~~
imajes
Right.

Plus many carriers store luggage in 'cartons' - metal containers with the bags
stacked inside. These are put on with a special forklift thing. Essentially
offloading all of these can happen fast. If you are being super smart, you can
stick connecting flight backs in these cartons, and literally just drive over
to the next flight and load.

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joez
I don't understand the point on hedging. Both turning an aircraft around
faster and a successful hedge on jet fuel result in higher profit. But not
sure how the two are related?

Regarding hedging, Southwest gets too much publicity for being so slick to
hedge fuel before oil prices shot through the roof years ago. Hedging is not
part of its core competency, or at least it isn't unless they are pioneering a
new business model of providing a service and then leveraging for profit on
the futures markets. As in, they could have lost money on the hedge as well.
Unless Southwest could use their understanding of the airline industry to
predict a huge rise in oil demand, hedges should only be used as a tool to
smooth out expense lines.

Here's an oversimplified example to illustrate: A gas station owner hedges oil
futures. Might be smart because he isn't going to change his prices every day
to reflect the spot price and customers appreciate it. He has a better
forecast on his profitability because his expenditures are smoother. But it
isn't really his core competency to predict oil prices.

<http://en.wikipedia.org/wiki/Fuel_hedging>

TL;DR: Hedging can really help your profits but you don't read about the
companies that lost money on hedges. Maybe Southwest was able to build a team
of brilliant market researchers but I'm not sure it's a good idea for every
company to buy futures.

~~~
mhb
The hedging point is just another of the unsubstantiated assertions he makes.
As you say, there's not even any reason to mention hedging. If they use less
fuel they make more money independent of their mechanism for better knowledge
of their future price of fuel.

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Everest
More consumers are using kayak, bing/travel, and other flight aggregators.
Airlines are competing on the price of tickets so they tack on extra charges
at checkout. Southwest doesn't play in the aggregation game so they can factor
the price of storing luggage into the price of the ticket. Southwest doesn't
want to commoditize their product by making their flights available to
aggregators and part of that is offering a differentiated consumer experience.

This isn't the point that the author makes but could explain Southwest's
strategy with luggage....

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jrockway
It's my understanding that the majors make a ton of revenue off the checked-
bag fees. That's why they do it; even though it encourages people to carry-on,
and that decreases plane utilization (longer turn times), it still makes them
money.

(It also encourages airline loyalty. Fly 25k miles on one of the legacies, and
now checked bags are free. I stick with the legacies because of the great
loyalty programs and the ability to use the same airline domestically and
internationally. It is also nice to have an assigned seat.)

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vl
I wonder for a long time now what Southwest is going to do when they will have
to replace 737s finally. At some time at the future they will have depart from
old and uneconomical (by future standards) design and at this instant they
would have second incompatible plane operating in parallel and dramatic cost
increase.

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jim-greer
Interesting, but does he really check baggage when flying for business?
Waiting for the bags takes a lot longer than waiting for people to get their
bags off the plane. Checking might speed turnaround for Southwest, but it
slows things down for passengers.

The only time I check bags is when flying with my wife and daughter...

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rokhayakebe
So passengers spend between 30-40 minutes loading and unloading their carry on
luggage. By checking in those bags the airline saves time, but what about the
resources (employees) it would take to check those bags and to load/unload
them from the airplane.

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mcantor
30-40 _minutes_? What kind of passengers have you been travelling next to? I
travel exclusively with carry-ons--I haven't checked baggage in over 5 years--
and it has never taken me more than 90 seconds total to get one carry-on into
the overhead compartment, stuff my backpack under the seat in front of me, and
sit down.

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jeffmould
The 30-40 minutes is not per passenger, but how much time is wasted overall in
the loading/unloading process with carry-on baggage. The theory is that if no
passengers had carry-on baggage the load/unload times would be reduced to near
zero and turnaround times on the ground would be minimal thus reducing cost.
For each person with a carry-on that turnaround time increases thus costing
the airline money.

Next time you fly time how long it takes for the first person to get on the
plane until the last person boards and vice-versa. That time should total to
around 30-40 minutes.

~~~
mcantor
Ah, I see! That makes much more sense. Thank you for the explanation.

I'm very reluctant to consider checking baggage again, even seeing the
increased level of concern a company might give my bags. I hear so many horror
stories, and as an individual traveler, checking baggage is extremely time-
consuming.

A few months ago, I waited with my mother at baggage claim for 3 hours before
they finally determined that her bags were in a different state. Even when
things are running as expected, it takes an order of magnitude more time to
get in and out with your bags.

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tron_carter
I've always wondered why Southwest or some Airline startup couldn't take a
737, add second deck of passenger seating in the lower half of plane, where
luggage goes, add HVAC, exits, etc. then make everyone carry on 1 luggage for
commuter / weekend flights.

~~~
lotharbot
I take it you've never been in the lower "half" of a 737.

Passengers actually sit with their bellies about at the midpoint of the jet.
The area below the floor is about the same size as the overhead bins. It's
really not suitable for anything other than bags.

~~~
tron_carter
Thanks for the aerospace insight. I'm sure there are other issues with the
half-baked idea as well.

~~~
kljhgfvgbn
There are a couple of larger models where the crew rest area is in the cargo
hold. It's a removable unit the full width of the plane - equal to two of
those 5sided luggage pods and is very comfortable.

Airlines looked at using them as sleeping berths for first class passengers
but it's difficult to meet the escape time requirements.

Although you chances of exiting the aircraft in 90secs if it crashed in the
middle of the Atlantic in the middle of the night are pretty small - the FAA
has to pretend it's possible.

~~~
jrockway
_Although you chances of exiting the aircraft in 90secs if it crashed in the
middle of the Atlantic in the middle of the night are pretty small - the FAA
has to pretend it's possible._

What? This requirement is actually quite important. Take a look at:

<http://en.wikipedia.org/wiki/Air_France_Flight_358>

I followed a few links and skimmed the full report, but couldn't find the time
it took to evacuate. But it was under 90 seconds, even with several exits not
usable. Since the aircraft was already burning before it came to a stop, any
time savings was critical to ensuring survival. And everyone did survive.

So I think this regulation is important. If there was just one exit, and it
was blocked, there would have been 300 people dead in a fire instead of 0.

~~~
kljhgfvgbn
Yes evacuation on take off and landing is very important.

However the regs don't differentiate about the stage of the flight, even if
you were only allowed to use the bed during cruise, at 30,000 over the ocean -
the same time applies.

~~~
jrockway
Dunno, this has also been useful. Imagine a scenario like UAL811:

<http://en.wikipedia.org/wiki/United_Airlines_Flight_811>

You are downstairs in your bed, when the cabin depressurizes and you can't
move around. The depressurization also damages the flight controls, making a
clean landing unlikely. The unclean landing occurs, the plane catches on fire,
and you burn to death in your bed because "regulations are silly".

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F_J_H
Interesting - yes. Informative - yes. "Genius" though?

