Southwest Airlines is undergoing significant transformations, including the introduction of a basic economy fare and changes to its longstanding baggage policies. These adjustments are part of a strategic move to increase revenue, driven by pressures from Elliott Investment Management. The changes signal an end to Southwest's signature "two bags fly free" policy and introduce new restrictions on ticket flexibility and baggage allowances.
The newly launched basic economy fare by Southwest Airlines is non-refundable and prohibits any changes. Additionally, flight credits for these tickets will expire within six months, contrasting with the 12-month validity for other fares. The basic economy fare also restricts travelers from accessing same-day standby tickets, marking a departure from Southwest's traditionally flexible policies.
Southwest is modifying its baggage policy, affecting various tiers of passengers. Top-tier A-List Preferred members will continue to enjoy the benefit of checking two bags for free. Meanwhile, A-List level members and Southwest credit card holders can check one bag without incurring fees. However, passengers purchasing any ticket except the Business Select fare will now face baggage fees. Business Select ticket holders are still entitled to check two bags free of charge.
These changes include a shift from open seating to a single-class cabin with assigned seats, aiming to boost revenue. Southwest's open-seating policy, a hallmark of the airline, is being phased out as it moves towards assigned seating. This transition represents a major overhaul in Southwest's operational model.
The impetus for these changes comes from increasing pressure on Southwest to enhance revenue and returns. Elliott Investment Management, a prominent hedge fund, has been instrumental in pushing for these reforms. In response, Southwest is streamlining its services and implementing new strategies to meet financial expectations.