Southwest Airlines will begin charging for checked bags for the first time ever this spring.
Image Source: Southwest Airlines, Ashlee D. Smith
Free checked bags will officially go away for tickets purchased on or after May 28. However, customers in the top fare class will not have to pay for bags. Frequent flyers with the A-List Preferred statues will still get two bags for free. A-List level members and Southwest credit card holders will also get one checked bag for free.
The cheap airline is a popular option for tourists visiting Central Florida theme parks, with free checked bags being a major perk. The benefit is so ingrained that Southwest trademarked the slogan “Two bags fly free.”
This change, among others, was pushed by activist investment firm Elliott Investment Management, which took a stake in Southwest and five board seats last year.
Other U.S. airlines make over $5 billion from bag fees, so this could be a big money-making move for Southwest.
That said, Southwest previously insisted they wouldn’t charge for bags, estimating they could make between $1 billion and $1.5 billion from bag fees but would lose $1.8 billion of market share. (via CNBC)
Southwest Airlines CEO Bob Jordan said on a July earnings call, “After fare and schedule, bags fly free is cited as the No. 1 issue in terms of why customers choose Southwest.”
Southwest’s then-chief transformation officer Ryan Green said in September, “The fact that free bags is a key driver of choice creates the risk that customers may choose the competition if we change the policy.” Green stepped down last month.
The airline did not announce how much checked bags will cost. Competitors like Delta, United, and American charge at least $35 for one bag.
Delta Air Lines president Glen Hauenstein said at an investor conference after Southwest’s announcement, “I think clearly, there are some customers who [chose Southwest] because of [bags fly free], and now those customers are up for grabs. We’ll see how that plays out over the next period of time as they continue to implement multiple changes to their products.”
The checked bag fee is just one of a series of big changes to Southwest. The airline also announced they will launch a new basic economy fare. They will change the way customers earn Rapid Rewards, with frequent flyers now earning more depending on how much they pay. Redemption rates will vary depending on flight demand. Credits for tickets purchased on or after May 28 will expire in one year or earlier, depending on the type of fare.
These announcements come after Southwest announced last year that they would replace their famous open seating model with assigned seats.
Southwest COO Andrew Watterson told CNBC, “What’s changed is that we’ve come to realize that we need more revenue to cover our costs. We think that these changes that we’re announcing today will lead to less of that share shift than would have been the case otherwise.”
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