The airlines continue to provide us with the best laboratory for customer experience management. On the heels of several major airlines attempting to improve their margins by "unbundling" service such as luggage check-in or seat assignment, Southwest launches an ad campaign to make the exact point that they don't unbundle these services.
Of course, Southwest prefers to refer to unbundling as "nickle and diming" which is a somewhat less flattering view of the practice. Regardless of your viewpoint as to whether charging for extra luggage is "bad profits" - and I would argue that if they are a surprise to the buyer they are - Southwest's response confirms what we would expect in any market; that being the fact that competition ultimately resolves these strategy issues for us. Bad profits are usually met, in a competitive market, with competitors drawing a strong distinction with their own practices. The folks at Southwest obviously had a choice. They could have adopted a similar practice, but instead they chose to forgo the margin opportunity and position their sacrifice as a customer benefit.
I'll bet that, regardless of the impact of the new airline pricing strategies (you may not be effected by these charges) Southwest has picked up brand equity as part of this exchange of volleys. It may not show up on their balance sheet as quickly as charging for extras, but in the long run, it will be worth more to them.