Southwest Airlines is set to implement significant changes to its baggage policy and fare structure, marking a departure from its long-standing tradition of offering free checked bags. Starting May 28, passengers will be required to pay for checked luggage, a first in the airline's history. These changes are part of broader strategic adjustments that include the introduction of a new basic economy fare and alterations to the Rapid Rewards program.
The decision to charge for checked bags will impact all customers except those with elite frequent flyer status or specific credit card holders. Passengers holding "A-List Preferred" status will continue to enjoy the benefit of two free checked bags, while those with A-List status will receive one complimentary checked bag. Additionally, holders of Southwest's co-branded credit cards will be entitled to one free checked bag. However, customers purchasing tickets in all fare classes except the top tier will face additional baggage fees, marking a significant shift from the airline's previous single-class cabin model.
"We are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization." – CEO Bob Jordan
The introduction of the basic economy fare aligns Southwest with its competitors who have long offered such options. This move is part of a broader strategy under pressure from activist investor Elliott Investment Management, which acquired a stake in the airline last year and secured five board seats. The firm has been instrumental in pushing for rapid changes to improve the airline's financial performance.
"What's changed is that we've come to realize that we need more revenue to cover our cost of our costs." – COO Andrew Watterson
These changes come as U.S. airlines collectively generated over $5 billion in baggage fees last year, with Southwest contributing $5.5 billion to this figure alone. The airline's decision to now charge for checked bags underscores the need to enhance revenue streams amidst increasing operational costs.
Additionally, Southwest plans to revamp its Rapid Rewards program, allowing customers to earn more miles based on their spending rather than just flight distance. This change aims to further incentivize higher spending among travelers. The airline will also modify its flight credit expiration policy, with credits expiring within a year or potentially sooner depending on the fare type purchased.
In another significant shift, Southwest will transition from open seating to assigned seating arrangements. This change will introduce premium seating options with extra legroom, further aligning the airline’s offerings with industry standards.
"The fact that free bags is a key driver of choice creates the risk that customers may choose the competition if we change the policy." – Ryan Green, then chief transformation officer
The policy overhaul reflects Southwest's response to competitive pressures and evolving market dynamics. While the introduction of baggage fees represents a departure from a hallmark of its customer-friendly policies, these measures are aimed at sustaining and enhancing the airline's financial health.