Southwest Airlines to start charging for checked bags from May 28

Southwest Airlines is ending its long-standing free checked bag policy, opting for a paid model to boost earnings. The move aligns with industry standards and follows investor pressure.

In Short

• Southwest Airlines to start charging for checked bags
• Two free bags still for A-List Preferred customers
• Policy change effective from May 28

Southwest Airlines announced on Tuesday that it will begin charging some customers for checked bags, ending its long-standing free baggage policy. The change is part of the airline’s strategy to improve earnings.

This marks another shift away from Southwest’s traditionally passenger-friendly policies. Last year, the Texas-based carrier announced plans to end open seating, a hallmark of its brand for over 50 years.

Its "bags fly free" policy has been an outlier in the airline industry. Southwest is the only major US carrier that allows customers to check two bags at no cost, a strategy that company executives have said differentiates it from rivals.

But the policy would change on May 28 as lackluster earnings have fueled pressure to revamp its business model. CEO Bob Jordan has set a goal to lift Southwest's operating margin to at least 10% in 2027 from 2% last year - a standard investors had come to expect from the airline before the pandemic.

According to news agency Reuters, the policy shift suggests a growing influence of activist investor Elliott Investment Management at the airline. The hedge fund, whose nominees hold five of 15 board seats, had criticized Southwest's leadership for not charging a fee for checking bags like other airlines to boost its revenue.

Under the new policy:

Two free checked bags will remain for A-List Preferred customers and passengers who purchase the most premium fare.

A-List loyalty members will receive one free checked bag.

Customers with Southwest’s co-branded credit card will receive a credit for one checked bag.

All other passengers will now be required to pay for their first and second checked bags.

Baggage fees produced more than $7 billion in revenue in 2023 for major US airlines, but Southwest generated just $73.4 million, according to the Bureau of Transportation Statistics.

Until now, the airline had been resisting investor pressure to start charging for bags, saying its data showed that a no-bag fee policy was the number one reason customers chose it.

(With Inputs From Reuters)