Southwest Airlines' advertising is heavy on the message that you can check bags for free. But the $300 million in revenue it still gets from merger partner AirTran Airways' fees is one reason Southwest has slowed the two airlines' combination.
"I can actually make a case that for business reasons, we may not want to" link flights soon, Southwest CEO Gary Kelly said during a conference call with analysts.
Dallas-based Southwest bought AirTran last year, but it plans to continue to charge baggage fees on AirTran flights until operations are fully integrated, which isn't expected until 2014.
Southwest will soon debut the first AirTran plane converted into a Southwest seating layout and paint job, but it has slowed plans to convert the full fleet. Southwest also put off until 2013 plans to link its flights with AirTran's so travelers could book connecting flights on the carriers.
In addition to bag fees, AirTran also has business class that it sells for higher fares and assigned seats. Southwest has none of those -- and passengers may be confused to fly both in one trip. What's more, Southwest wouldn't charge baggage fees on an itinerary that includes connecting Southwest and AirTran flights, Kelly said.
"If you were to challenge us and say, 'How are you going to recover the $300 million worth of fees that AirTran collects,' I would tell you that yeah, I think that'll be a take-away," Kelly said. Even though the company may get more revenue from linking the two airlines' flights together, "I just don't believe you're going to see a material profit benefit."