We’ve known for some time that Southwest Airlines is working on plans to build its own network of premium airport lounges, and during the Dallas-based carrier’s latest earnings call, chief executive Bob Jordan gave a little more information about the strategy behind these lounges.
Airlines generally market premium lounges as a space to reward their most loyal customers; the ones who will go out of their way to fly the same airline, day in, day out, acquiring elite frequent flyer status, and all the perks that go along with it.
What many premium lounges have become, however, are spaces reserved for passengers willing to spend hundreds of dollars a year on an airline’s cobranded credit card. Perhaps the most famous example of this is Delta’s partnership with American Express, which has resulted in lines out the door of its Sky Clubs.
Delta can command an annual fee of $650 for its Delta SkyMiles® Reserve American Express Card, which gives holders 15 complimentary visits to its Sky Club network per year (if they can get to the front of the line before their flight is boarding).
In contrast, Southwest Airlines is currently only able to charge an annual fee of $229 for its top-tier Southwest Rapid Rewards® Priority Card, which is cobranded with Chase.
The card unlocks many of the benefits that flyers used to enjoy flying with Southwest before activist investor Elliot pushed through controversial changes to the airline’s business strategy. A free checked bag, complimentary seat assignment, seat upgrades, and boarding benefits are all bundled within this card.
Customers are seeing the benefits of Southwest’s credit cards with acquistions ups 28%, but, realistically, Southwest can’t start earning more from its Chase partnership without something really compelling – that something would be a network of premium airport lounges.
“We fully intend to continue to expand the co-brand offering and opportunities for our customers,” Jordan said during the earnings call, indicating that the current lineup of credit cards isn’t set in stone.
“I know I’ve teased the lounges. That’s something, obviously, that there’s work underway. We’re not ready to formally announce that yet,” Jordan added. “The whole purpose, again, is to expand co-brand opportunities, expand the card set, and provide to our customers something that they really, really want.”
So far, it looks like Southwest is working on plans to build out its initial premium airport lounges in Austin, Dallas, Nashville, Denver, and Honolulu.
According to View from the Wing, the relatively small size of this network could be supplemented with a Priority Pass card to make the upsell to a new premium credit card with lounge access more compelling.
Chase is certainly no stranger to operating airport lounges, with its growing network of Chase Sapphire Lounges by The Club. There are now eight of these lounges across the United States, including in Boston, Dallas, Las Vegas, New York JFK, LaGuardia, Philadelphia, Phoenix, and San Diego.
A ninth lounge is also slated to open in Los Angeles soon.
Southwest’s own customer surveys reveal that the airline is testing the ground for an ultra-premium cobranded credit card with an annual fee of $650. That kind of fee means the rollout of an extensive lounge network is an inevitability.
