Southwest will add a fourth rate tier to boost revenue

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DALLAS – Southwest Airlines will add a fourth fare category as part of changes aimed at attracting more business travelers and increasing revenue.

The new fare tier will be higher than Southwest’s cheapest tickets, but lower than the airline’s two main fare categories. Leaders in the South West believe this will close the big price gap between the cheapest fares, called Wanna Get Away, and the more expensive tickets.

Consumers who purchase the new fare tier, called Wanna Get Away Plus, will earn 33% more frequent flyer points than the base ticket, and they can transfer the value of a ticket to another Southwest customer.

This is the first major change to Southwest’s rate structure in 15 years. Airline officials said the changes announced Thursday would go into effect in May or June.

Southwest hinted at the changes in December without giving details. The new fare tier is part of several measures, including a new credit card deal with Chase Bank, which the Dallas-based airline hopes to collectively boost annual revenue by $1 billion to $1.5 billion next year.

Executives declined to say how much Wanna Get Away Plus seats will cost versus cheaper seats, but that will vary by flight. Along with more frequent flyer points and the ability to transfer credits, Plus buyers will be allowed to fly standby at no additional cost, even if there is a higher fare for the new flight.

Southwest will also add early boarding privileges to the next most expensive fare, called Anytime, to avoid cannibalizing full-fare ticket sales. Early boarding is a plus because Southwest does not assign seats, which means the last passengers to board a crowded flight end up in the middle seats.

Andrew Watterson, the airline’s chief commercial officer, said any changes should be particularly attractive to business travellers. Southwest is trying to further distance business travel from Delta, American and United.

Southwest’s most expensive tickets, called Business Select, are fully refundable and include early boarding, a free drink, and frequent flyer points. Anytime tickets are also refundable, unlike Wanna Get Away. All three include up to two free checked bags – something other US airlines don’t offer – and free ticket changes.

A majority of Southwest customers purchase Wanna Get Away fares.

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