Southwest airlines introduced yesterday priority-boarding fee (“Southwest Airlines Finds a New Fee”, WSJ, Sep 2nd, ).
With the new service, a customer may purchase an “EarlyBird Check-in” and get a better boarding position. Since southwest doesn’t have assigned seats, boarding earlier means there will be more open seats and overhead bin space from which to choose. Customers have to pay $10 (one-way) for the service. Note that the fee grants a customer a “better boarding position” and not even a specific boarding group. What does that mean? If you read the Frequently Asked Questions on Southwest’s website you will see the following questions and answers:
Will EarlyBird Check-in Customers get an “A” Boarding Pass and be among the first to board?
Probably, but not always. It depends upon how many Business Select, Rapid Rewards A-List, and EarlyBird Check-in Customers are on a given flight. However, as an EarlyBird Check-in Customer you will definitely get a better boarding position than Customers in the general boarding group.
Will the number of EarlyBird Check-in Passengers be limited on each flight?
No. All eligible Customers can purchase EarlyBird Check-in.
The interesting fact is that according to Southwest, there’s no limit to the number of customers that can purchase early check-in (while there is a limit of 15 Business Select per flight). In this case the equilibrium customer behavior is one in which everybody purchases the Early Bird check-in. (In the queueing literature, this is referred to as “Follow the Crowd”). However, even if you paid for it (and you should, as a rational customer), you still have a chance of to board last, as part of group C. Since this fee is nonrefundable, you get the pleasure of paying for nothing. Borderline Chutzpa.
Paying for priority is a classical way to differentiate among customers by their willingness to pay. However, in this case, given the non-concrete nature of the product (priority and not a specific seat) and the “Follow the Crowd” nature of consumer behavior, we get that this is nothing more than a price increase, which puts new light on the following quote:
What other folks are doing is charging money for what they used to do for free. What we’re doing is offering new things that we hadn’t done before,” said Kevin Krone, Southwest’s vice president of marketing.