Strong Airline Profitability? Is it Really About Fees?
|Source: Dallas News|
A couple of sentences toward the end of the article identify the airline with the highest profit margins in the industry. Accoridng to the Wall Street Journal, Southwest tops the industry with a 16.5% net profit margin, nearly double the average margin in the industry (9%). Actually, the newspaper does not account for a one-time tax benefit of roughly 6%. After adjusting for that figure, Southwest’s advantage over the rest of the industry is much narrower. Still, Southwest generated strong profits, as it has in the past. The article does not delve into the reasons for that profitability. Southwest Airlines does not charge baggage fees, unlike nearly all of its rivals. Southwest also does not administer ticket change fees, unlike nearly all of its rivals. How then does it generate strong margins in the industry? That’s the question that the newspaper should explore.