Months after ditching its open seating policy, Southwest Airlines is ending its most recognizable perk: Free checked baggage.
Southwest announced on Tuesday that starting on May 28, the airline will introduce charges for the first and second checked bags. However, passengers who are members of its A-List loyalty program or are traveling on a business fare will not be subject to these fees.
Bob Jordan, the CEO of Southwest, expressed optimism about the change, stating, “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,” in a press release.
This marks a significant departure for Southwest, a carrier that has historically provided complimentary checked bags ever since its inception around 60 years ago. Despite the trend among other airlines to implement and raise baggage fees, Southwest has adhered to its policy of free checked bags, even trademarking the slogan “bags fly free” which has been a central theme in its marketing efforts.
Jordan told investors on an analyst call last year that it had no plans to start charging for the first two bags being checked. He said the no fees for the first two bags is “a big part of what attracts people to Southwest.”
“After fare and schedule, bags fly free is cited as the number one issue in terms of why customers choose Southwest. So, it’s not something under consideration right now,” Jordan said at the time.
He also said that there are costs, and not just revenue, that come from charging for bags. It slows the time it takes to load a plane as passengers take more time to look for space in overhead bins for carry-on bags. Also, some bags have to be moved from the cabin to the cargo hold once there is no longer any room available in the overhead bins.
Southwest didn’t immediately reveal how much the checked bags will cost. Regardless of the price, it will likely instantly boost its bottom line because Southwest has two to three times as many checked bags as other airlines.
Shares of Southwest (LUV) soared nearly 6% in premarket trading.
Changes at Southwest
Southwest has introduced a number of changes since Elliott Investment Management took a $1.9 billion stake in the carrier last year. The activist investor called for leadership changes and an operations overhaul to boost profitability.
Other hallmarks that Southwest has changed include its cabin. Assigned seating will soon be introduced, as well as premium seats, bringing it in line with traditional carriers. The airline also rolled out red-eye flights.
Southwest said customers were clamoring for those changes. When people switch to a competitor from Southwest, the company said the No. 1 reason passengers cite is open seating. But the change will also help the company charge some passengers more for their tickets.
The airline has also changed the way it sells tickets. Traditionally it only sold them on Southwest.com, but recently said they would sell them on Expedia in an attempt to attract more customers.
Southwest also announced Tuesday it will also start selling “basic economy” fares in May, which are low-priced tickets but with tons of restrictions.
Last month, Southwest cut 15% of its corporate workforce, or 1,750 people – the first mass layoffs in the company’s history. The layoffs will save the company $210 million this year and $300 million in 2026.
The company started the year with a new chief financial officer, Tom Doxey, who most recently was president of Breeze Airways. Southwest’s previous chief financial officer Tammy Romo and chief administration officer Linda Rutherford will retire from their positions in April.
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