Southwest Airlines to Start Charging for Checked Bags in May \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Southwest Airlines is ending its long-standing free checked bag policy, introducing fees for passengers who don’t qualify for exemptions. The change, starting with flights booked on May 28, comes as the airline faces financial struggles and pressures from investors. The move is expected to generate revenue but may cost Southwest customers who chose it for its baggage perks.
Southwest Airlines Ends Free Checked Bags: Quick Looks
- New Baggage Fees – Southwest will begin charging for checked bags starting May 28, except for qualifying passengers.
- Who Still Gets Free Bags? – Elite Rapid Rewards members, Business Select flyers, and credit card holders will still receive free baggage perks.
- Financial Pressures – Southwest is cutting costs amid financial struggles and investor pressure, recently announcing 1,750 layoffs.
- Profit vs. Customer Loyalty – The airline estimated bag fees could bring in $1.5 billion annually but risk $1.8 billion in lost business.
- Stock Reaction – Southwest shares rose 9% after the announcement, while competitors saw potential to win over disillusioned travelers.
- Industry-Wide Challenges – Other airlines, including Delta, are facing declining consumer confidence and weakening demand.
Deep Look
Southwest Airlines is abandoning its decades-old free checked bag policy, marking a major shift in its business model. Starting May 28, most passengers will be required to pay for checked luggage, unless they hold a Southwest credit card, a Business Select ticket, or elite status in the airline’s Rapid Rewards program.
The decision, announced Tuesday, is part of a broader cost-cutting strategy as the airline faces profitability challenges and pressure from activist investors. The move comes less than a year after Southwest also announced it would transition to assigned seating, ending another unique feature that had set it apart from rivals.
A Major Policy Shift After Years of Free Bags
For years, Southwest built its brand on the promise that “bags fly free.” It was one of the last major U.S. airlines to resist charging for checked luggage, even as competitors raked in billions from baggage fees.
However, during an investor presentation in September, Southwest executives acknowledged that the policy might be costing them more than it was worth. According to internal estimates, baggage fees could generate $1.5 billion annually, but the airline feared losing up to $1.8 billion in revenue from customers who chose Southwest specifically for its generous baggage allowance.
Despite this risk, CEO Bob Jordan defended the policy change as a necessary step to attract new customer segments and return to profitability.
“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,” Jordan said in a statement.
Who Will Still Get Free Checked Bags?
Southwest will continue offering free checked baggage to select passengers:
- Two free checked bags for Rapid Rewards A-List Preferred members and Business Select travelers.
- One free checked bag for A-List members and some credit card holders.
- All other passengers will pay a fee, though Southwest has not yet disclosed pricing details.
The airline will also introduce a new basic fare for its lowest-priced tickets, though specifics on how this differs from current offerings remain unclear.
Layoffs, Investor Pressure, and Financial Struggles
Southwest’s decision to introduce baggage fees comes amid broader cost-cutting efforts. In February, the airline announced 1,750 layoffs, eliminating 15% of its corporate workforce in its first major job cuts in 53 years. The company described the layoffs as part of a transformation into a “leaner, faster, and more agile organization.”
The financial struggles are not new. In October 2023, Southwest reached a truce with hedge fund Elliott Investment Management, which had been pushing for profitability improvements. As part of the deal, Elliott secured several seats on the airline’s board, increasing pressure for cost-cutting measures like the new baggage fees.
The financial pressure appears to be affecting Southwest’s broader strategy. Last year, the airline also announced plans to introduce assigned seating, extra legroom fees, and overnight red-eye flights—all departures from its traditional business model.
Stock Market and Industry Reactions
Following the baggage fee announcement, Southwest’s stock surged 9%, signaling investor approval of the move.
Meanwhile, competitors saw the shift as an opportunity to steal Southwest customers who might be disillusioned by the change.
Delta Airlines President Glen Hauenstein, speaking at the J.P. Morgan Industrials Conference, noted that Southwest’s baggage policy had been a key differentiator in the market.
“Clearly, there are some customers who chose them because of that, and now those customers are up for grabs,” Hauenstein said.
A Tougher Market for Airlines
The airline industry as a whole is grappling with economic uncertainty, as consumer and corporate confidence in travel has weakened. Delta, for instance, recently cut its quarterly earnings and revenue expectations, citing a slowdown in domestic travel demand.
Other airlines have also struggled:
- Delta’s stock is down 24% in 2024.
- United Airlines has dropped 22%.
- JetBlue has fallen 27%.
- American Airlines has plummeted 32%.
Southwest itself lowered its own quarterly revenue expectations, now predicting revenue per available seat mile will rise between 2% and 4%—down from earlier projections of 5% to 7%. The airline also expects capacity to decline by 2%, reflecting a more cautious approach to growth.
Customer Reactions: Will Flyers Stay Loyal?
For many Southwest customers, the free bag policy was a major reason for their loyalty. Some travelers expressed disappointment over the change.
Dorothy Severson, a Southwest customer at Chicago Midway International Airport, said she preferred the old policy.
“I would rather have the free checked bags, that’s for sure. It’s one of the main reasons I still fly Southwest.”
However, the airline is betting that travelers will stay, even with the added costs. By following industry norms and introducing new ticketing options, Southwest hopes to remain competitive in a changing airline market.
What’s Next for Southwest?
With its free bag era ending and assigned seating coming soon, Southwest is undergoing one of the biggest transformations in its history. While these changes may improve its profitability, they also risk alienating longtime loyal customers who valued Southwest’s simple, no-frills approach.
As May 28 approaches, all eyes will be on how travelers react to the baggage fees—and whether the shift helps Southwest reclaim financial stability or costs it its distinctive identity in the airline industry.
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