Southwest Airlines announced on Tuesday that it will soon end its free checked bags policy.
Why it matters: The airline has long touted that “bags fly flee,” which has been a calling card for the company throughout its 54-year history.
- Jettisoning the policy will likely make distinguishing itself from budget competitors like Spirit and Frontier harder.
State of play: The new policy changes go into effect starting May 28.
- Starting then, only Southwest’s Rapid Rewards A-List Preferred members and passengers who book Business Select will receive two included checked bags.
- Select customers including frequent flyer A-List members and Southwest credit card holders will be allotted one included checked bag.
- The company announced increased points for customers who book higher-priced seats (e.g. Business Select) while reducing the points earned for less expensive seats (Wanna Get Away and Wanna Get Away Plus).
- Southwest will also add a basic economy fare class, the last major airline to offer that tier.
Our thought bubble: With the end of free checked bags, there’s little left separating Southwest from airlines with higher prices but more perks, or low-cost barebones carriers — leaving it stuck in the muddy middle, Axios’ Alex Fitzpatrick’s writes.
What they’re saying: In a video statement Tuesday morning, Southwest CEO Bob Jordan said the changes “will help us return to the levels of profitability we all expect, and to support our collective long term success. It’s also about adapting to what our customers want.”
- United Airlines CEO Scott Kirby said at a JP Morgan Chase online event Tuesday that Southwest’s policy change is like “the slaying of a sacred cow.”
- Delta President Glen Hauenstein, who also spoke at the conference, said he thinks some Southwest customers could now be “up for grabs.”
Catch up quick: Waning consumer demand has hit Southwest, Delta and American Airlines hard, the three companies announced this week in warnings that first-quarter results will disappoint.
- Southwest cut its unit revenue growth forecast on Tuesday, citing lower government travel and “softness in bookings and demand trends as the macro environment has weakened.”
- Delta and American cut their own forecasts as well.
Delta CEO Ed Bastian told CNBC companies have started “to pull back in terms of corporate spending.”
- “Consumer spending started to stall,” he added, “Largely domestic, largely in the close-in, but it was also exacerbated, as you know, [by] the uncertainty that’s out there, and consumers in a discretionary business do not like uncertainty.”
