Southwest Airlines Ends Free Checked Bags Policy for Passengers

Photo: Reuters

Southwest Airlines is making a big change to its baggage policy. The airline, which has allowed passengers to check up to two bags for free for many years, will now start charging a fee. This move ends a decades-old practice that once set Southwest apart from its competitors.

Starting May 28, passengers who book new flights will have to pay to check their bags unless they qualify for certain exemptions. People who are at the highest levels of the airline’s Rapid Rewards loyalty program, those flying in Business Select class, and those who have the airline’s credit card will still get at least one free checked bag. However, other travelers will have to pay a fee, though the airline has not yet announced the exact pricing.

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For years, Southwest used its free baggage policy as a key part of its marketing. The airline even ran ad campaigns promoting the benefit. Just last fall, company executives said the policy was one of the biggest things that made Southwest different from other airlines. However, Wall Street has long criticized the airline for missing out on extra revenue by not charging for checked bags. Other major U.S. airlines already charge for baggage, and Southwest estimates it could earn about $1.5 billion a year from these new fees. However, they also predict that some customers may stop flying with them because of this change, which could cost them $1.8 billion in lost business.

Southwest’s CEO, Bob Jordan, said the airline is making this change to improve profits and attract new customers. The company has been struggling financially, and some investors have been pressuring it to find ways to make more money. Last October, Southwest made a deal with hedge fund Elliott Investment Management, which gave the investors several seats on the company’s board of directors.

Southwest is also cutting costs in other ways. Last month, the airline announced that it would lay off 1,750 employees, which is about 15% of its corporate workforce. These layoffs are the first in the company’s 53-year history and are expected to be completed by the end of June. The goal is to make the airline operate more efficiently and improve financial performance.

Southwest’s stock jumped more than 9% on Tuesday after the announcement. However, some customers are unhappy with the change. Dorothy Severson, a Southwest passenger waiting for a flight at Chicago Midway Airport, said, "I would rather have the free checked bags, that’s for sure. It’s one of the main reasons I still fly Southwest."

This isn’t the only big change coming to the airline. Southwest recently announced that it will no longer offer its open boarding system, which has been in place for more than 50 years. Instead, the airline will start assigning seats to passengers, similar to how other airlines operate. This change is expected to take effect next year. Southwest will also introduce a new basic fare option for its lowest-priced tickets.

Other airlines see this as an opportunity to attract customers who preferred Southwest because of its free baggage policy. Delta Airlines President Glen Hauenstein said, "I think clearly there are some customers who chose them because of that, and now those customers are up for grabs."

At the same time, airlines are facing challenges due to economic concerns. Delta Airlines recently lowered its profit and revenue expectations for the quarter, saying that demand for travel is weaker than expected. Shares of Delta, United, JetBlue, and American Airlines have all dropped significantly this year. Southwest also reduced its revenue growth forecast, expecting a smaller increase than previously predicted.

The airline hopes that the extra money from baggage fees will help it stay competitive while keeping ticket prices affordable. However, many travelers will now have to factor in extra costs when deciding whether to fly with Southwest.