In a surprising policy change, Southwest Airlines will begin charging passengers for checked bags, marking the end of a perk that had distinguished the airline for more than 50 years.
The decision, which comes after months of pressure from activist investor Elliott Investment Management, represents a significant shift for the low-cost carrier.
Southwest had long held onto its policy of free checked bags, which executives touted as one of the key factors that set it apart from competitors. However, with mounting pressure from Elliott, which took a stake in the airline last year and secured five board seats, the airline is now making moves to boost its revenue.
Starting May 28, passengers who purchase tickets in all but the top-tier fare class will be required to pay for checked bags. However, there are exceptions: A-List Preferred frequent flyers will still be allowed to check two bags for free, while A-List members will get one free checked bag. Additionally, Southwest credit card holders will continue to receive one complimentary checked bag.
For years, Southwest's "Two bags fly free" slogan was a cornerstone of its brand. But the airline is now aligning itself with industry norms, as competitors like Delta, American Airlines, and United have generated billions in revenue from baggage fees. While Southwest has not yet disclosed the exact fee for checked bags, rivals currently charge around $35 for a single bag.
Southwest executives had long resisted implementing baggage fees, arguing that the free bags policy was a key reason why customers chose the airline. CEO Bob Jordan previously emphasized that "bags fly free" was one of the top reasons passengers picked Southwest, alongside fares and schedules.
In a September presentation, the airline estimated it could generate $1 billion to $1.5 billion in additional revenue from baggage fees, although it also projected it would lose $1.8 billion in market share. Despite this, the airline has reversed course, with Chief Operating Officer Andrew Watterson explaining that the airline now needs additional revenue to cover rising costs.
This policy shift comes just months after Southwest's former Chief Transformation Officer, Ryan Green, warned analysts that charging for bags could lead to customer defections. However, the airline's new leadership believes the changes will have a smaller impact on its market share than initially anticipated. Green left the company in February.
