Michelle Chapman, AP Business Writer
Southwest Airlines will begin charging customers the fee to check their packages. It abandons the decades-long practice that executives described last fall as key to distinguishing budget carriers from rivals.
Southwest has built a long-standing advertising campaign on its policy of checking two bags free of charge to passengers, saying on Tuesday that those who haven’t reached the top tier of the Rapid Rewards Loyalty program, who buy business class tickets or hold airline credit cards will have to pay for the check bag.
The airline did not outline the rate schedule, but said the new policy will start with flights booked on May 28th.
“There is a great opportunity to meet the needs of our current and future customers, attract new customer segments that are not competing today, and return to the level of profitability that both shareholders and shareholders expect,” CEO Bob Jordan said in a statement.
A year ago, the Dallas-based airline announced it would be repealing an open board system, another tradition that has been in use for over 50 years. Southwest is scheduled to start operating the plane with passengers in their assigned seats next year.
Southwest has been struggling lately and is under pressure from activist investors to increase profits and revenue. The airline had a ceasefire in October to avoid a proxy fight in hedge fund Elliott Investment Management, but Elliott won several seats on the company’s board of directors.
The airline last month announced it would eliminate 1,750 jobs or 15% of corporate workers, in the first major layoff in the company’s 53-year history.
Jobs that are primarily scheduled to be completed by the end of June are part of a plan to cut costs and turn the company into a “faster, faster, more agile organization,” Jordan said.
Southwest shares rose more than 9% on Tuesday.
Just like Southwest Investor Day in late September, airline executives described Bagfly Free as the most important feature in distinguishing Southwest from their rivals. All other major airlines have been charged for checked packages, and Wall Street has long claimed that the Southwest has left money behind.
The airline estimates that billing bag fees will bring about $1.5 billion a year in September, but the airline spent $1.8 billion in lost business from customers who chose to fly southwest for generous baggage allowances.
Southwest said Tuesday that if it continues to offer two free check bags, prompt reward A-List priority members and customers will travel with business-selection fares and offer one free check bag to A-List members and other selected customers. Passengers with Rapid Rewards credit cards will receive a credit in one check bag.
Those who do not qualify in these categories will be charged to check their bags. The airline said it will roll out new basic fares with lowest-priced tickets when the changes take effect.
Southwest bets that the added bag fee will outweigh business losses from travelers who often see costs in addition to ticket prices. Tuesday’s rival saw the opening.
“Obviously, I think there are customers who chose that for that, but now they have grabs,” said Glen Hauenstein, president of Delta Airlines, who spoke at the JP Morgan Industrials Conference.
However, in the current economic environment, keeping travel affordable may involve oversized rolls to stay competitive. The trade war launched by President Donald Trump has shaking US markets by thwarting the flying optimism that was prevalent among businesses and households last year.
To begin the week, Delta cut quarterly revenue and revenue expectations, saying that recent declines in corporate trust in consumers and the economy has weakened domestic demand. Delta stocks fell 24% this year.
United’s shares reached 22%, JetBlue 27%, and American Airlines reached a whopping 32%.
On Tuesday, Southwest cut its own quarter expectations. The airline currently expects revenue per available seat mile to rise between 2% and 4%. This is a significant decrease from previous forecasts of a 5% to 7% increase. The airline said it expects capacity to fall by around 2%.
The airline announced last year that it would have passengers allocated seats, as well as charge additional fees in more legrooms, offering Redeye flights.
Original issue: March 11, 2025 10:30am EDT
