Southwest Airlines has just announced a very big change. (It all boils down to 1 powerful word)

When I heard the news of the big policy change at Southwest Airlines this week (first announced during Southwest's earnings call on Thursday), I started thinking about the math.

Then, the more I thought about Southwest's decision in the context of the whole industry (and the more I tried to do the math), the more intrigued I became.

The change to Southwest is quite simple. In short, Southwest has announced as of now that flight credits with the airline will never expire.

Never. No. To infinity and beyond, so to speak.

To steal my favorite Southwest slogan over the years: "You are now free to roam the country." (Said in the pilot's voice on PA.)

Basically, if you buy a qualifying low-fare ticket on Southwest Airlines and end up canceling your plans more than 10 minutes before departure, you get flight credit. With this new announcement, these credits are valid forever.

Now, of course, I'm unaware of all the math problems and predictions that Southwest used to come up with this new plan. But let me use my well-honed thinking powers for a moment:

For one thing, Southwest just increased the monetary value of a flight credit. A credit that never expires is simply worth more than one with an expiration date. On the other hand, it could mean more passengers traveling instead of having their credits expire, which would mean for Southwest a reduction in what is called "breakage revenue", basically when a customer pays you but never use your service. On the other hand, if we do have one, it's worth noting that Southwest's most expensive fare classes (those marketed to business travelers) are generally not part of this calculation, as they usually already receive cash refunds instead of credits. . Also, the marginal cost of adding an extra passenger to a flight that was already going to fly anyway is not as high as outsiders might assume. I don't know Southwest's incremental cost per additional passenger, and it would vary by flight, but some estimates put the industry figure as low as $20. On top of that, the biggest contributor to the marginal cost per passenger is jet fuel. But, as I wrote earlier, Southwest is the only airline among the 4 major US airlines to cover its fuel costs, which means that its fuel costs are much lower than other airlines. And, on top of that, making the credits valid forever could paradoxically reduce the likelihood that some passengers will actually use them. If they never expire, there's no pressure to use them before a deadline. Additionally, the mere fact that Southwest credits now never expire may well tempt some passengers to choose Southwest over another airline. But, a large percentage of these passengers will not cancel their flights, and therefore they will never have credits anyway! On top of that, you also have passengers who could use their credits, but would have used them in the old expiration period.

OK, the calculations are wearing me out. Welcome to my world. The bottom line here is that I can't predict the bottom line.

I suspect that Southwest, which of course has a full team of quants and finance professionals, calculated the loss of breakage revenue that would result from this new policy against other factors. But otherwise, this is an example of w...