Months after ditching its open seating policy, Southwest Airlines is ending its most recognizable perks: Free checked baggage.
The airline will begin charging for the first and second checked bag beginning on May 28, Southwest announced Tuesday. However, members of its A-List loyalty program, holders of its branded credit card or those traveling on a business fare will be exempt from the fees.
“We have tremendous opportunity to meet current and future customer needs, attract new customer segments we don’t compete for today, and return to the levels of profitability that both we and our shareholders expect,” said Bob Jordan, CEO of Southwest, in a press release.
It’s a seismic shift for the Southwest, which has always offered free checked bags since the airline started about 60 years ago and kept the policy in place when its competitors starting adding and increasing fees. In fact, the carrier has trademarked “bags fly free” slogan and it’s been a key part of its advertising.
Jordan told investors on an analyst call last year that it had no plans to start charging for the first two bags being checked. He said the no fees for the first two bags is “a big part of what attracts people to Southwest.”
“After fare and schedule, bags fly free is cited as the number one issue in terms of why customers choose Southwest. So, it’s not something under consideration right now,” Jordan said at the time.
He also said that there are costs, and not just revenue, that come from charging for bags. It slows the time it takes to load a plane as passengers take more time to look for space in overhead bins for carry-on bags. Also, some bags have to be moved from the cabin to the cargo hold once there is no longer any room available in the overhead bins.
However, his view changed after Southwest started selling tickets through third-party websites, like Kayak or Google Flights, which showed customers were choosing price regardless of how generous Southwest’s policies were. Plus, the hiring of new executives from other airlines that already charge for bags “further validates” the change, Jordan said.
“All of these initiatives are new to Southwest, but they are not new to the industry,” Jordan said an investor conference Tuesday. He added that the changes “are exactly what our employees want us to do.”
Southwest didn’t immediately reveal how much the checked bags will cost. Regardless of the price, it will likely instantly boost its bottom line because Southwest has two to three times as many checked bags as other airlines.
Despite not charging for the first two checked bags, Southwest collected $73 million in baggage fees in 2023, and $62 million in the first 9 months of 2024, according to Department of Transportation statistics. However, that is a fraction of the baggage fees collected by other airlines, with American Airlines collecting $1.4 billion in 2023, while United Airlines pulled in $1.2 billion and Delta Air Lines garnering $985 million.
“While this could alienate some customers, other major airlines peers have fees today,” wrote Jeff Windau, an analyst at Edward Jones, in a note. “As long as Southwest maintains competitive pricing, we do not envision a significant loss of customers.”
Competitors pounced on the news, including Delta CEO Ed Bastian said at an investors conference Tuesday that Southwest’s decision to charge for bags could be a help to its rivals.
“Clearly there are some customers who chose them because of that (bags fly free policy),” Bastian said. “Now clearly those customers are up for grabs.”
United CEO Scott Kirby also predicted that other airlines, including United, are likely to see gains because of Southwest’s decision, because it was one of the things that made Southwest distinctive, especially among bargain-hunting passengers.
“It’ll be good for everyone else,” he said. “It’s the slaying of a sacred cow. I view it as a big deal.”
Shares of Southwest (LUV) soared more than 6% in Tuesday trading.
Changes at Southwest
Southwest has introduced a number of changes since Elliott Investment Management took a $1.9 billion stake in the carrier last year. The activist investor called for leadership changes and an operations overhaul to boost profitability.
Other hallmarks that Southwest has changed include its cabin. Assigned seating will soon be introduced, as well as premium seats, bringing it in line with traditional carriers. The airline also rolled out red-eye flights.
Southwest said customers were clamoring for those changes. When people switch to a competitor from Southwest, the company said the No. 1 reason passengers cite is open seating. But the change will also help the company charge some passengers more for their tickets.
The airline has also changed the way it sells tickets. Traditionally it only sold them on Southwest.com, but recently said they would sell them on Expedia in an attempt to attract more customers.
Southwest also announced Tuesday it will also start selling “basic economy” fares in May, which are low-priced tickets but with tons of restrictions.
Last month, Southwest cut 15% of its corporate workforce, or 1,750 people — the first mass layoffs in the company’s history. The layoffs will save the company $210 million this year and $300 million in 2026.
The company started the year with a new chief financial officer, Tom Doxey, who most recently was president of Breeze Airways. Southwest’s previous chief financial officer Tammy Romo and chief administration officer Linda Rutherford will retire from their positions in April.
