Southwest Airlines has decided to introduce fees for checked bags, marking a significant shift from its long-standing tradition of allowing passengers to check up to two bags for free. This change will affect those who haven’t reached the higher tiers of the Rapid Rewards loyalty program, purchased a business class ticket, or hold the airline’s credit card. The new policy starts with flights booked on or after May 28, although the specific fee schedule has not been disclosed.
This decision comes amid efforts to boost profitability and revenue, as the airline faces pressure from activist investors. Recently, Southwest reached an agreement with Elliott Investment Management to avoid a proxy fight, which resulted in Elliott gaining several seats on the board. In addition, the airline announced layoffs affecting 1,750 jobs, representing 15% of its corporate workforce, as part of a strategy to cut costs and streamline operations.
Despite the potential backlash from customers who valued the free baggage policy, Southwest anticipates that the introduction of bag fees could generate significant revenue. However, there is concern that this could lead to a loss of business from price-sensitive travelers who choose Southwest for its baggage policy. The airline’s competitors see this as an opportunity to attract new customers.
Southwest also plans to introduce a basic fare option with its lowest-priced tickets and to continue offering free checked bags to certain loyalty program members and business class travelers. This move is part of a broader strategy that includes changes like introducing assigned seating and additional charges for extra legroom.
In the context of a challenging economic environment marked by decreased consumer confidence and a turbulent market, maintaining affordability remains crucial for airlines. Southwest, like its competitors, is adjusting its revenue expectations and strategies to navigate these challenges.
