In a move that is likely to have customers doing some flight comparison shopping, Southwest Airlines has announced a policy shift, ending their long-standing practice of allowing passengers two free checked bags. Only certain ticket classes, or Southwest Airlines credit card holders, will be allowed free checked bags.
All of the airlines top-tiered tickets will maintain free checked bags, as will frequent flyer levels like A-List Preferred (two free checked bags) and A-List (one checked bag). Southwest Airlines branded credit card holders will also get one checked bag.
Everybody else will have to pay. Southwest hasn’t announced what the cost will be to check a bag, but industry standard for some of the major competitors is $35. According to federal data, checked bags generated about $5 billion in fees for rival airlines in 2024.
The move comes as a new firm, Elliot Investment Management, took an ownership stake in the company last year and has been looking for ways to increase revenues. Southwest Airlines believes it would gain between $1 and $1.5 billion in revenue from checked bags but lose $1.8 billion of the airline market share, reinforcing the belief that the company’s best competitive marketing tool in the industry is the perk of free checked bags.
Bob Jordan, the CEO of Southwest Airlines has long maintained that free checked bags are the biggest draw to the low-cost airline. “After fare and schedule, bags fly free is cited as the No. 1 issue in terms of why customers choose Southwest,” said Jordan last July. However, he now believes the new no-checked bag policy will drive up signups for credit cards and the free bags policy hasn’t been as much of a boon for new customers now that their ticket fares and schedules are posted in more places.
The new bag policy is the latest in changes to Southwest, which announced an end to its open seating policy in favor of upselling for perks like extra legroom, which is competitive with rival airline policies.
As is expected, those rival airlines view this significant change at Southwest Airlines as an opportunity.
The CEO of United Airlines, Scott Kirby, sees the move as a shift as a significant one for the airline industry. “I view it as a big deal…,” he said. The president of Delta Airlines, Glen Hauenstein, was more frank, saying that now more customers are in play for the rival airlines.
“I think, clearly, there are some customers who (chose Southwest) because of that, and now those customers are up for grabs.”
As the policy has yet to go into effect, any speculation about the impact on consumer behavior is premature, but in terms of airline news that is likely to impact the decision-making of many passengers, Southwest Airlines’ announcement feels like one that will cause a shift.
At Southwest, their commercials say that you are now free to move about the country; starting in May, it’s going to cost you a little bit more.
