Southwest Airlines just delivered some great news for its investors: record operating revenue for the fourth quarter, a strong holiday outlook, and profits that beat expectations.
According to The Wall Street Journal, demand stayed strong from summer through fall, bag fees are “bolstering sales,” and the airline’s upcoming assigned and extra-legroom seating, set to debut January 27, are performing “in line with expectations.”
In pure financial terms, the strategy looks like a success story. But in psychological terms? It may be too soon to tell.
Southwest Airlines’ Short-Term Win
On paper, the turnaround is impressive. Third-quarter operating revenue hit $6.95 billion, a record. That’s 1.1% higher than last year and slightly above analyst expectations. After early-year turbulence from economic uncertainty, tariffs, and weaker consumer confidence, Southwest seems to be flying high again.
The numbers suggest CEO Bob Jordan’s bold moves—charging for bags, adding premium seating, and introducing assigned seats—are starting to pay off. But before we celebrate Southwest’s strategic genius, it’s worth remembering that numbers can rise even as trust erodes.
A Tale of Two Southwest Airlines
In my earlier Forbes pieces, “Southwest Airlines Policy Changes: Is More Choice What Customers Want?” and “Southwest Airlines Just Made A Costly Mistake In Consumer Psychology,” I argued that Southwest’s shift toward fees and fare complexity violated fundamental principles of behavioral science.
For fifty years, the Southwest brand was a mental shortcut. Customers didn’t have to compare fare classes, calculate baggage costs, or worry about seat assignments. The brand offered cognitive simplicity in an industry built on confusing complexity.
By eliminating choice, Southwest reduced friction and created emotional loyalty. Barry Schwartz’s “paradox of choice” tells us that too many options lead to decision fatigue. Daniel Kahneman’s “loss aversion” shows that customers feel losses twice as strongly as equivalent gains.
Now, the airline that sold simplicity has begun selling the same complexity as its larger peers. And, they are asking customers to pay for what used to be free.
Are Southwest’s Gains Real?
So why are revenues up? There are at least two possible explanations.
Scenario One: The new strategy really is working. Customers have accepted the trade-offs, the new fees feel normal, and the upgrades are attracting higher-paying travelers. They may be capturing new flyers who, like me, found their long-time lack of assigned seating a deal-breaker.
Scenario Two: The airline is coasting on residual goodwill and strong seasonal demand, combined with the psychological inertia of customers who haven’t yet re-evaluated their loyalties.
When brands change core promises, consumers don’t always react immediately. They adapt slowly, anchoring to past experiences. The danger can come later, when the mental “break” finally occurs, and switching feels justified.
Cognitive Load Meets the Pain of Paying
Southwest’s executives might see “choice” and “premium seating” as progress. But for customers, each added decision is another friction point. Now, a flyer must choose between Choice Extra, Choice Preferred, Choice, and Basic options. Every time a traveler wonders, “Should I pay for a better seat?” or “Should I check a bag or carry one on?” it drains a little cognitive energy.
In behavioral terms, the airline is violating its customers’ mental model. Flyers who previously chose Southwest to avoid decision complexity are now faced with the same nickel-and-diming choices one sees at other airlines.
The new policies also invoke the “pain of paying,” a reaction in our brain when we have to pay for something. This reaction is stronger when the price is higher than expected. In Southwest’s case, the previous price point for both seating and luggage was zero, practically guaranteeing at least a little “pain.”
The new policies might be fine for short-term revenue. But they may cause a slow erosion of brand fluency, the ease with which customers understand and choose a brand.
The Investor Trap
Investors love simple stories. “Revenue up, profit up” is easy to understand. “Brand equity down, cognitive dissonance rising” isn’t. But the latter often determines what happens a few quarters down the line.
Southwest’s original advantage wasn’t just operational efficiency. It was psychological efficiency, too. Now, by chasing incremental revenue, it risks becoming one more airline selling “choices” customers didn’t ask for.
Stuck in the Middle?
There’s one other threat to Southwest profitability: these changes they are making may not be enough. Their new “Choice Extra” seats are regular economy seats with a bit more legroom and, apparently, free drinks. That’s a welcome but fairly minor upgrade.
United and Delta, meanwhile, are generating much of their profit from true premium programs: first and business class seats, lounge access, and loyalty programs. Even American Airlines, twice the size of Southwest, isn’t keeping pace with United and Delta for profit due to having less premium capacity to sell.
Southwest is unlikely to capture the premium “front cabin” flyers served by the big three. But, their policies now mirror those competitors, potentially turning off budget-focused flyers. The danger is ending up stuck in the middle—neither premium nor cheap. Even their previous brand strength won’t help because they have redefined the brand promise.
The Long View for Southwest
To be clear, Southwest’s transformation might not doom it. The airline could retain enough cost-conscious customers while capturing new higher-spending flyers and others previously put off by its unique policies. I’m one of those. While in most cases I’m unlikely to forgo my United perks, now I’d at least consider a Southwest flight if it had a far better schedule and I could lock in a seat I liked. I never check a bag, so the new luggage fees wouldn’t matter.
My fear is that once you retrain your customers to think like accountants, they’ll start doing the math. And, they may realize the “low-cost” carrier isn’t so low-cost anymore.
Herb Kelleher once said, “If you don’t change, you die.” That’s true. But, if you change what made your customers love you, they may decide they don’t love you anymore.
The robust financial results make me more optimistic about Southwest’s future than I was when they first announced the changes, but the airline should wait and watch 2026 unfold before declaring victory.