Southwest Airlines to Implement Fees for Checked Luggage Commencing May 28th
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The Skinny
Southwest Airlines announced some major shakeups this week, including plans to ditch its long-standing "Bags Fly Free" policy and introduce a "basic" fare tier.
The Details
In a press release, the company revealed that starting May 28, only top-tier loyalty program members, "A-List Preferred" and "Business Select" ticket holders will be able to check in two bags at no charge. Those on the next loyalty tier and Southwest credit card holders get one free bag. Everyone else, well, they're gonna have to cough up some cash. As for how much, the airline's keeping quiet on that one.
Adding to the list of changes, Southwest is also adding a "basic" fare option. This budget-friendly flight ticket will ax perks such as advanced seat assignments and legroom extras. Nice knowing you, extra legroom.
On top of that, Southwest is shaking up its loyalty points system. Higher tier ticket buyers will earn more points, while those flying on lower tier fares will see their rewards diminish.
Why The Change?
Southwest's CEO, Bob Jordan, called the moves "strategic," claiming they'll help the airline tap new customer markets and bolster profits. The airline's statement emphasized that these changes are all about "deepening and rewarding loyalty" among its most dedicated fliers.
A Bit of History
Last year, Southwest announced it would be saying adieu to its open seating policy and introducing paid premium seat options. Tuesday's changes are just the latest addition to that initiative.
For years, Southwest had defended its "Bags Fly Free" policy as a key differentiator. But after activist investor Elliott Investment Management purchased a $1.9 billion stake in the airline, the pressure was on to bring in more revenues, and baggage fees were a clear target. Even with the prodding, though, Southwest's CEO promised the policy would stay put. Guess he needed more time to warm up to the idea.
How Much Cash Do Rivals Pull in From Baggage Fees?
Compared to competitors like American Airlines, United, Delta, Spirit, and JetBlue, Southwest's baggage fee revenues are barely making a dent. In 2023, the company only brought in $73 million from baggage fees, and just $62 million in the first three quarters of the previous year. American Airlines bagged a whopping $1.35 billion in 2023 and $1.12 billion in the same period.
More Reading
- Elliott Goes After Southwest CEO in $1.9 Billion Activist Push (Bloomberg)
- Southwest Airlines Trims Corporate Workforce in First Mass Layoff (Wall Street Journal)
- In light of the recent changes announced by Southwest Airlines, the captain may soon require passengers to pay baggage fees, a move that was previously unheard of.
- As a result of these changes, Southwest Airlines is expected to lay off employees, a stark contrast to their previous policies and an indication of the industry's shifting landscape.
- For those interested in tracking the quarterly impacts of these changes on Southwest Airlines, the company's updates can be found on their LinkedIn profile.