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Southwest Airlines, known for its long-standing policy of allowing passengers to check two bags for free, has announced a major change. Starting May 28, the airline will begin charging fees for checked luggage, a move that aligns it with competitors in the industry.
Who Will Still Get Free Checked Bags?
Passengers who qualify for Southwest’s upper-tier Rapid Rewards loyalty program, those who book Business Select tickets, and holders of the airline’s credit card will still be eligible for free checked baggage. However, customers who do not fall under these categories will have to pay an additional fee to check their bags. The airline has yet to disclose the exact pricing structure for the new baggage fees.
Why Is Southwest Making This Change?
Southwest Airlines has been facing financial struggles and increasing pressure from investors to boost revenue and profits. CEO Bob Jordan emphasized that these changes are necessary for the airline to meet customer demands and achieve sustainable profitability.
“We have tremendous opportunity to meet current and future customer needs, attract new customer segments, and return to the levels of profitability that both we and our shareholders expect,” Jordan stated.
In addition to the new baggage fees, Southwest had previously announced that it would eliminate its traditional open seating policy, replacing it with assigned seating in 2025. These moves are seen as part of a broader strategy to revamp its business model.
Financial Challenges and Investor Pressure
Southwest Airlines has been under pressure from hedge fund Elliott Investment Management, which gained board seats after pushing for cost-cutting measures. The airline recently announced plans to lay off 1,750 employees, accounting for 15% of its corporate workforce, to streamline operations and reduce expenses.
Despite these challenges, Southwest’s stock saw a 9% increase on Tuesday, reflecting investor optimism about the airline’s cost-cutting measures.
Impact on Passengers and Competition
For years, Southwest differentiated itself from other U.S. carriers by offering free checked bags, a feature that attracted cost-conscious travelers. Industry analysts estimate that baggage fees could generate approximately $1.5 billion in annual revenue for the airline, but it may also result in lost business from customers who valued this perk.
Passengers like Dorothy Severson, who was traveling from Chicago Midway International Airport, expressed disappointment over the decision. “I would rather have the free checked bags, that’s for sure. It’s one of the main reasons I still fly Southwest,” she said.
How Other Airlines Are Responding
With Southwest removing its free checked bag policy, competitors such as Delta Airlines see an opportunity to attract Southwest’s former customers. Delta President Glen Hauenstein noted that travelers who previously chose Southwest due to baggage benefits may now consider switching airlines.
Economic Outlook and Airline Industry Trends
The airline industry is facing additional financial pressures due to a weakening economy. Delta recently cut its revenue and earnings forecasts, citing declining consumer and corporate confidence. Other major airlines, including United, JetBlue, and American Airlines, have also seen significant stock declines this year.
Amid these economic concerns, Southwest adjusted its own revenue expectations, lowering its projected revenue per available seat mile from a 5%-7% increase to just 2%-4%. The airline also anticipates a 2% reduction in capacity.
What’s Next for Southwest Airlines?
In addition to baggage fees, Southwest plans to introduce a new basic fare option for budget travelers. The airline also intends to implement extra charges for added legroom and introduce overnight red-eye flights to maximize profitability.
As Southwest navigates these financial and operational shifts, passengers will need to evaluate whether the airline still offers the best value compared to competitors.
