The Mainstreaming of Southwest Airlines

Despite all the changes, Southwest is today locked into a defiant effort to differentiate itself through a heavily promoted advertising campaign, focused on its "no hidden fees" strategy. This strategy is fraught with risk. The primary one is that while airline passengers seem to enjoy complaining about fees, evidence is scant that they book away from airlines who charge them.

In fact, during the five months that Delta(DAL) eschewed the first-bag fees charged by peers, it found that many of its passengers nonetheless assumed that it charged them -- and carried on more baggage in an effort to avoid paying them.

At the conference, Kelly detailed this aspect of the Southwest dilemma. "Every company wants to be different, and would hope to be remarkably different, especially in customers' minds," he said. "It's not so much about hidden fees as it is a golden opportunity to drive home the fact that we are remarkably different and we are devoted to low fares and we don't want to screw the customer."

On the other hand, he acknowledged, "Time will tell if that translates into more money and more customers for Southwest Airlines. And it has to. If it doesn't, we probably will have to change that."

Aviation consultant Robert Mann says the airline industry's new economics -- lower costs at most carriers, tumbling fuel prices, and now a recession -- combine with Southwest's now-large size and rising costs to create pressure for Southwest do things it never did before.