Southwest Airlines announced Tuesday it will begin charging passengers for checked bags, abandoning one of its most distinctive consumer-friendly policies as part of a broader strategy to boost revenue and satisfy shareholder expectations.
The Texas-based airline revealed that passengers will pay fees for their first and second checked bags on all flights booked May 28 or later. This significant policy shift marks the end of an era for the carrier, which has long differentiated itself from competitors through customer-friendly practices like free luggage and open seating.
The end of an era for budget travelers
The airline has built its reputation largely on policies that appeal to cost-conscious travelers. For decades, Southwest proudly advertised its “Bags Fly Free” policy as a key differentiator while other airlines introduced and steadily increased baggage fees.
With this change, Southwest joins every other major U.S. airline in charging for checked luggage. The policy had been one of the last remaining elements of Southwest’s original low-cost business model that helped the airline grow from a small regional carrier to one of the nation’s largest airlines.
Southwest has not yet updated its website with specific pricing for the first and second bags. Currently, the airline charges $150 for a third checked bag and between $150 and $200 for certain overweight bags.
Loyalty program becomes more important
While most customers will soon pay for checked bags, Southwest is preserving the perk for select travelers. According to the announcement, Rapid Rewards A-List Preferred members and customers traveling on Business Select fares will continue receiving two free checked bags.
A-List Members and certain other customers will be entitled to one free checked bag. This tiered approach seems designed to strengthen Southwest’s loyalty program by providing tangible benefits to frequent flyers and premium fare customers.
The strategic shift suggests Southwest is working to increase enrollment in its Rapid Rewards program while creating additional revenue streams. This approach mirrors strategies used by other major carriers that have successfully monetized loyalty programs over the past decade.
Broader transformation underway
The baggage fee announcement follows another major change revealed in July, when Southwest announced plans to abandon its iconic open seating policy in favor of assigned seats. The airline also plans to offer premium seating options with extended legroom on all flights.
CEO Bob Jordan framed these changes as part of a comprehensive effort “to meet current and future customer needs, attract new customer segments we don’t compete for today.” The statement suggests Southwest is working to appeal to business travelers and higher-spending customers who may have previously chosen other airlines.
According to Southwest, approximately one-third of seats across its fleet will offer extended legroom, comparable to what industry competitors provide on narrow-body aircraft. This configuration will create a premium cabin experience previously unavailable on Southwest flights.
Financial pressures drive policy shifts
The abandonment of two signature policies within a year signals significant financial pressure on the airline. Southwest has maintained its free baggage and open seating policies for more than 50 years, using them as cornerstones of its marketing and customer experience.
Recent financial challenges appear to have forced Southwest to reevaluate its approach to revenue generation. The airline industry has faced numerous difficulties in recent years, including pandemic-related disruptions, rising fuel costs, wage increases, and Boeing’s production problems limiting fleet expansion.
Southwest’s stock price has underperformed compared to many competitors, creating pressure from shareholders for management to find new revenue streams. The introduction of baggage fees represents a potentially significant income source, as other major airlines generate billions annually from such ancillary charges.
Implementation timeline
While the baggage fee policy takes effect for flights booked May 28 or later, the timeline for assigned seating remains undefined. The airline has not specified when passengers will be able to select seats or purchase premium seating options.
Southwest did announce it will introduce a new basic fare category for its lowest-priced tickets purchased on or after May 28. This new fare structure will likely come with additional restrictions compared to current Southwest tickets, similar to basic economy fares offered by other airlines.
The staggered implementation suggests Southwest is carefully managing the rollout of multiple significant changes to minimize customer confusion and operational challenges.
Potential customer reaction and industry impact
The decision to charge for checked bags removes one of the few remaining differentiators in an increasingly homogenized airline industry. Many loyal Southwest customers have specifically chosen the airline because of its free baggage policy, potentially creating backlash when the fees take effect.
Southwest appears to be calculating that the revenue benefits will outweigh any potential customer defections. The airline may also be hoping that its continued lack of change fees and its more generous checked bag allowance for loyalty program members will retain most customers despite the new charges.
For the broader airline industry, Southwest’s decision effectively eliminates the last major holdout against baggage fees among large U.S. carriers. This standardization could potentially allow all airlines to further increase ancillary fees without fear of losing customers to competitors with more generous policies.
Corporate strategy shift
The changes reflect a broader corporate strategy shift under CEO Bob Jordan, who took leadership of the airline in February 2022. Jordan faces the challenge of maintaining Southwest’s distinctive culture and customer service reputation while meeting financial expectations in an increasingly competitive industry.
The airline has recently made other significant changes, including exiting several airports and adjusting its route network. These moves suggest Southwest is comprehensively reevaluating all aspects of its business model to improve financial performance.
Southwest’s stock has responded positively to the announcements, with shares rising 7.20% following the news. This investor reaction indicates Wall Street approval of the airline’s efforts to find new revenue sources and align its business practices more closely with industry standards.
As Southwest implements these changes in the coming months, both customers and investors will be watching closely to see if the airline can successfully transform its business model while retaining the customer loyalty that has been instrumental to its past success.
