Since Southwest Airlines (LUV) launched out of San Antonio in 1966, two key features differentiating it from competitors: open seating and two free checked bags up to 50 pounds each for every passenger, regardless of fare class.
Even as other airlines cracked down on weight limits and raised the costs of checking bags on shorter flights, Southwest used this generous policy to build out a loyal customer base. “Two bags fly free” is formally a registered trademark with the airline.
All this will soon come to an end as on March 11 Southwest confirmed that it would its free-checked-bag policy.
Southwest Air passengers will pay to check bags
Starting May 28 travelers in all but the airline’s highest Wanna Get Away fare bundle and those who have free bag perks through loyalty status will need to pay to check bags on any flights.
The airline is also launching a new basic economy fare, in which travelers purchase a base fare and then pay to add features like checking bags and selecting seats.
“We have tremendous opportunity to meet current and future customer needs, attract new customer segments we don’t compete for today, and return to the levels of profitability that both we and our shareholders expect,” Southwest CEO Bob Jordan said in a statement.
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All this comes amid strong pressure from the hedge fund and majority investor Elliott Investment Management.
After purchasing enough company stock to be able to call shareholder meetings, Elliott pushed for severe cost cuts and an executive overhaul amid what its leadership classified as Southwest’s “poor execution and […] stubborn unwillingness to evolve.”
The Dallas carrier recently cut 15% of its corporate workforce as well as senior leaders like Executive Vice President Ryan Green and Chairman Gary Kelly. Although the most recent earnings report showed an operating-revenue increase of 1.6%, Elliott apparently wants more.
‘We need more revenue’: Southwest COO
In summer 2024 the airline also replaced its signature open-seating policy to one in which customers either pay for seat selection or choose from what’s available during the 24-hour check-in period.
With those two changes, Southwest now has no features that distinguish it from its competitors and will need to think of other ways to draw in travelers.
At the time, Jordan said that scrapping the free bags was “not something under consideration right now” because “bags fly free is cited as the number one issue in terms of why customers choose Southwest.”
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“What’s changed is that we’ve come to realize that we need more revenue to cover our costs,” Southwest Chief Operating Officer Andrew Watterson said in a March 11 CNBC interview. “We think that these changes that we’re announcing today will lead to less of that share shift than would have been the case otherwise.”
Southwest Air shares at last check were up 7.5% at $30.30.
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