Southwest Airlines is preparing to abandon the decades-old industry norm of letting most customers check bags for free. Beginning March 11, passengers will be required to pay baggage fees for checked baggage at the time of ticketing. This is an incredible turnaround for an airline that has generally been well-known for its luggage-friendly policies. It comes amid mounting pressure on the airline from a campaign waged by activist investor Elliott Investment Management. By the end of last year, Elliott had won a stake in the company and handily won five board seats.
Just consulted with top hospitality leaders in Houston on the forthcoming fees for checked bags. Industry practice suggests rivals typically assess $35-$40 for the first checked bag on domestic tickets. Southwest Airlines announced it would continue to accept passengers’ first two carry-on bags for free. For a better customer experience, the airline has been retrofitting bigger overhead bins on its Boeing fleet. This decision is intended to allow more carry-on bags onto the plane and reduce overcrowding in the plane’s cabin.
Along with these changes, Southwest Airlines is launching a new Basic fare. Customers who buy this S fare will have no ticket change privileges and will board last. Additionally, fare credits tied to the Basic fare will expire after six months, limiting options for more budget-conscious travelers.
People who fly frequently on Southwest and sign up for the airline’s A-List program already receive free checked bags. A-List members can still have their first checked bag be free. Meanwhile, peak status holders in the airline’s Rapid Rewards loyalty program get to check two bags for free as a benefit of their elite tier status. Customers purchasing the highest-level Business Select fares will receive two complimentary checked bags, maintaining some perks for loyal customers amidst broader policy changes.
We’re excited that, on the heels of this activation, Southwest Airlines is moving to innovate in this area. They do intend on selling tickets for 2026 flights that will include assigned seats. This represents a significant change from the airline’s long-standing open seating arrangement. Further, the airline is reconfiguring its aircraft with more extra-legroom seats, which airlines love since they’re able to charge a premium ticket price for them.
The context for these positive advances is a very difficult economic picture. Even the decidedly optimistic Bob Jordan, CEO of Southwest Airlines, acknowledged the economic headwinds now battering consumer spending.
“There is definitely economic weakness on the consumer side.” – Bob Jordan, CEO of Southwest Airlines
Southwest Airlines has not seen any drop in customers purchasing tickets.
“We have seen no book-down on that day or after that day.” – Squawk on the Street
The airline is still charting a difficult course through this transition. It needs to be sensitive to customer satisfaction with an increasing focus on financial pressures and the competitive dynamics of the industry.