Southwest: Customers who don't show up will pay fees

DALLAS Southwest Airlines (LUV) will show less love to passengers who fail to cancel tickets before their flights.

The airline announced on Friday that it will start charging a no-show fee. The company also said that fees on early check-in and oversized bags are going up. And it repeated a longtime goal for boosting profits that could only be met next year if it doubles earnings.

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Southwest brags that it doesn't charge ticket-change fees, and it lets customers apply the price of an unused ticket to a later trip.

But customers who take advantage of those policies are leaving too many seats empty, the airline says.

So beginning sometime next year, Southwest will charge a no-show fee on its cheapest fares, known as "Wanna Get Away" tickets. Neither the date nor the amount of the fee has been set.

CEO Gary Kelly said the change will bring Southwest closer in line with policies at other airlines and won't alienate customers.

"By our research, customers understand that we all could benefit - customers and the company - from the opportunity to resell a seat," Kelly said. "Once the airplane takes off and (a seat) is empty, we can't ever reclaim that."

The airline expects to raise $100 million next year from the new fee and increases in current fees, part of a plan to boost revenue by $1.3 billion in 2013 over 2012. Southwest is on pace for revenue this year of about $17.5 billion based on figures from 2011 and the first nine months of 2012. Executives discussed the plan at an investor conference Friday in New York.

Southwest has long had a goal of boosting return on investment by 15 percent per year but hasn't been able to do it. An analyst at the conference told Kelly that hitting the target next year would be heroic.

Kelly acknowledged that it would require at least doubling the company's earnings, but he didn't back away.

"We're looking for our revenue initiatives to take hold in 2013 in a way that would produce very strong earnings," he said, adding that such a goal assumed a growing economy and stable jet fuel prices.

Southwest officials said holiday bookings were strong and that they plan cost-cutting steps including eliminating 300 jobs through attrition.

In recent years, Southwest has bombarded TV viewers with "bags fly free" commercials to highlight that it doesn't charge customers for their first two checked bags or for changing a reservation - both fees are standard on most other major U.S. airlines. Southwest executives said they're not thinking about imposing those fees, but would announce other changes Saturday.

Executives said the fee for overweight bags will rise to $100 from $50, and early check-in, which helps move passengers toward the front of the boarding line and assure space for their bag in the overhead bins, will go to $12.50 from $10.

Southwest's AirTran Airways subsidiary will raise its fees for checking bags to $25 for the first bag, up from $20, and to $35 for the second, up from $25, said AirTran president Robert Jordan. Southwest has promised to end AirTran's bag fees when it folds AirTran into the Southwest fleet over the next few years.

The company also said October's Superstorm Sandy, which caused canceled flights in the Northeast, will reduce fourth-quarter operating profit by between $15 million and $20 million.

Shares of Southwest rose 11 cents to $10.25 in afternoon trading.