Southwest Airlines, known for its signature free checked baggage policy, is making a major change. Starting May 28, the airline will charge for the first and second checked bags. However, customers who are A-List loyalty members, hold a Southwest-branded credit card, or are flying on a business fare will still enjoy complimentary checked bags.
CEO Bob Jordan explained, “This shift helps us better meet customer needs, attract new market segments, and achieve profitability goals for the airline and its shareholders.”
A Historic Change for Southwest
For over 60 years, Southwest has made its free baggage policy a hallmark, setting it apart from competitors who introduced baggage fees years ago. The airline even trademarked the slogan “Bags Fly Free,” which has been a key part of its brand identity.
In the past, Jordan firmly stated that Southwest had no plans to charge for checked baggage, emphasizing how crucial this benefit was to attracting customers. However, his stance changed after Southwest expanded its ticket sales to third-party platforms like Kayak and Google Flights. These platforms revealed that price often drove customer decisions, regardless of Southwest’s generous baggage policy. Additionally, new executives with experience at other airlines that charge for bags were brought on board, further influencing the shift.
Baggage Fees to Boost Bottom Line
Southwest’s new baggage fees will likely bring in significant revenue, especially since the airline handles two to three times as many checked bags as its competitors. In 2023, Southwest collected $73 million in baggage fees, a fraction of what rivals like American Airlines ($1.4 billion) and Delta ($985 million) earned.
Analysts, including Jeff Windau from Edward Jones, believe this move will not significantly harm Southwest’s customer base, as long as the airline maintains competitive pricing.
Impact on Competitors
Southwest’s decision to introduce baggage fees is seen as a potential opportunity for competitors. Delta CEO Ed Bastian noted that some passengers may reconsider their loyalty to Southwest due to the removal of this perk. United CEO Scott Kirby echoed similar sentiments, stating, “It’ll be good for everyone else,” emphasizing that Southwest’s distinctive offering was now gone.
A Broader Transformation at Southwest
This move is part of a larger overhaul at Southwest, prompted by Elliott Investment Management’s $1.9 billion stake in the airline. The company is making strategic changes, including the introduction of assigned seating, premium seats, red-eye flights, and basic economy fares starting in May.
These changes align with customer feedback, which indicated that Southwest’s open seating policy led many to switch to competitors. Additionally, the airline is now selling tickets through platforms like Expedia and offering more restrictive low-cost fares.
Southwest has also made headlines for cutting 15% of its corporate workforce—1,750 employees. This cost-cutting measure will save the company $210 million this year and $300 million by 2026.
What’s Next for Southwest?
With new leadership and a clear focus on profitability, Southwest is undergoing a significant transformation. While the loss of the “Bags Fly Free” perk may change the airline’s appeal, it remains to be seen how the broader changes will impact the airline’s market share and reputation.
