Friends,

I’ve written about Southwest Airlines more than a few times on this blog. They are something of my “hometown” airline, and I’m flying them a lot in the next month.

I’ve admired their historic clarity of mission — and real-world profitability that was accomplished by creating a product customers liked buying and employees liked producing.

The Q2 earnings report this week was different. Not just because profits dropped by over a billion dollars—but because the response didn’t sound like Southwest. It sounded like everyone else.

That’s what makes this worth talking about.

In the past few months, Southwest has abandoned many elements of their brand’s core value proposition:

• They’ve introduced bag fees after decades of “bags fly free.”

• They’ve rolled out Basic Economy, expiring flight credits, and extra legroom seats (but still no power ports, no lounges, no food).

• They’ve laid off workers for the first time ever, sold off hedges, and loaded up on debt to finance share buybacks.

• Red-eye flying is in their schedule, assigned seats are coming, and international partners are in the works (Icelandair and China Airlines are the only ones in play at present).

• They’ve outsourced key operations, started selling tickets through Expedia, and done nearly all of it in a way that betrays the brand’s core ethos.

The current leadership team says it’s all necessary. That without these changes, they'd be losing even more money. That customers will adapt. That the long-term upside is intact.

Maybe.

To be clear: I am in favor of many of these changes. Most were either needed or will build a better airline.

But the seeming disregard for protecting their brand by wantonly retooling the airline’s passenger product to look like the industry’s status quo is concerning to me. The question is will their network’s sheer size make up for the brand loss.

And the jury is still out.

Here’s what this really is: a reminder that business isn’t complicated.

It’s easy to pretend it is. I’ve done that. So have you, probably. We wrap layers of strategy and spreadsheets around problems that, at their core, come down to one thing: Are we creating obvious, valuable outcomes for the people we serve?

Everything else is theater.

Southwest has historically understood that, down to the minutiae. They built the most consistently profitable airline in history not by mimicking competitors but by being the alternative. A low-friction, high-trust brand that wrote the book on corporate culture and customer loyalty. That clarity made them almost shockingly resilient.

Now? They’ve made themselves interchangeable. And early indicators seem to say that customers are acting accordingly

What I’m learning (every day) as an entrepreneur:

1. The product is the strategy

Not the brand deck. Not the investor memo. Not a 400-slide roadmap for Q3-Q4. The product. What you actually deliver. If it isn’t simple, direct, and built to make someone’s life better—you’re working on the wrong thing.

Southwest’s product used to be engineered around the human experience of air travel: fast turns, simple boarding, no hidden fees. That product was the brand. Now it’s hard to even say what they offer that Delta, United, or American don’t.

When customers can’t answer that, they leave.

A few things definitely do come to mind (like generally happier frontline employees and a massive domestic network) — but how does that weather the consumer psychology behind loss aversion and broken expectations? Much less the fact that domestic demand is presently, on balance, weak.

2. If you're explaining, you're not winning

The new leadership team is arguing that all these changes are working—because they’d be losing more money without them. That logic doesn’t hold. You don’t get credit for outperforming an imaginary counterfactual.

In our own business, when I’ve had to explain around the edges of poor performance—justifying a feature that nobody uses, a campaign that didn’t land, or a product promise that is just there to occupy words on a deck—I’ve realized I’m already on the back foot. You can't pitch your way out of fundamental misalignment.

3. Real differentiation is rare—and once it’s gone, it’s hard to get back

It took Southwest decades to build its reputation. The trust it built with “bags fly free” wasn’t about luggage—it was about signaling alignment with the customer. That trust made people loyal. It’s evaporating now, and the scary thing is: it doesn’t come back easily. You can’t market your way into being special again. You have to earn it, from the ground up.

Southwest’s latest moves feel less like reinvention and more like capitulation. But the story isn’t over. Maybe there’s a path back. Maybe leadership will course correct. But for those of us building something of our own, this is a flashing warning sign: don’t drift.

Every business reaches a point where it has to decide whether it wants to keep getting better for the customer—or just bigger for its own sake. One of those leads to real growth. The other leads here.

To me, it all feels a little presently sad to watch—but the story isn’t over yet.

And plainly, I think much of this could have been avoided if leadership hadn’t publicly declared last fall that “bags fly free” was here to stay—only to reverse course less than six months later and claim (in so many words) that charging for checked bags was based on customer feedback. That decision may prove costly, no matter how well everything else performs.

I’ll keep watching this one—because I love what Southwest has historically represented, believe in the people behind it, and see the airline’s story as a mirror for any of us trying to build something real.

Stay sharp. Build something useful. Do right by your customers.

Fly well.

P.S. Once again, here are a few extra details from the earnings call that caught my attention:

• Basic Economy rollout hurt more than expected: Bookings dropped. Conversion evidently plummeted. Southwest blamed the way fares were displayed, not the product itself (which I tend to believe, as I am buying their basic fares en masse and think they represent great value for tier members). But soft domestic demand is no help either — and across the board, the result is ongoing revenue headwinds into Q3.

• Don’t forget tax arbitrage on checked bag fees: By shifting $1B in fare revenue into bag fees, Southwest sidesteps the 7.5% domestic airfare tax. That’s not innovation—it’s optimization. Not customer-first, but helpful on the income statement for sure.

• Share buybacks aren't strategy: A $2 billion repurchase program sounds bold—but it doesn’t fix product woes nor a confused brand. That capital could have been used to build something customers actually want. Woof.

• Southwest is becoming a follower: They no longer hedge fuel. They’re pivoting to “liquidity targets”. They’re copying what the legacy carriers are doing—just with fewer frills and no premium cabin (which is what the market is actually buying) to show for it. Double woof.

NEWS

Premium Economy plus 777s are coming this all on American non-stops between JFK and LAX.

A landing Aeroméxico regional jet nearly crashed into a departing Delta 737 in Mexico City earlier this month.

Alaska and Hawaiian’s new, single loyalty program lands next month.

Video of an Alaska 737 that hit deer on the runway while landing in Kodiak.

Transavia (subsidiary of Air France-KLM) now allows you to resell your airline tickets. This is cool.

A Southwest 737 flying from Burbank to Las Vegas dove 500 feet to avoid another aircraft, injuring two flight attendants.

Southwest’s updated co-branded Chase cards (with seat assignment perks) are now live. The current sign-up bonuses are super strong, too.