Major Overhaul at Southwest Airlines: Bag Fees, Basic Economy, and More Changes

 

Southwest Breaks Tradition with Checked Bag Fees

Major Overhaul at Southwest Airlines: Bag Fees, Basic Economy, and More Changes

Southwest Airlines is undergoing a dramatic transformation, bringing an end to some of its most well-known policies, including complimentary checked baggage.

For the first time in decades, the airline will charge passengers for checking their bags. Additionally, a new basic economy fare will be introduced, which will not permit free ticket modifications. These policy shifts follow significant pressure from hedge fund Elliott Investment Management.

Southwest Breaks Tradition with Checked Bag Fees

On Tuesday, Southwest Airlines confirmed a change that was once considered unimaginable—it will implement fees for checked luggage.

This decision carries substantial financial risk. The airline previously stated that research indicated it could forfeit approximately $300 million in market share by adopting baggage fees. For years, Southwest has stood out in the industry by allowing customers to check two bags free of charge.

Abandoning its signature “two bags fly free” policy is just one part of the company’s broader strategy to increase revenue. In addition to baggage fees, Southwest is also shifting from open seating to a structured single-class cabin. Another major shift announced this week includes the launch of a basic economy fare that does not permit free changes.

What Passengers Need to Know

Who Will Be Charged for Checked Bags?
With the new policy, only travelers who purchase the airline’s highest-tier Business Select fare will continue to enjoy two free checked bags.

Members of the A-List Preferred frequent flyer program will also be entitled to two complimentary checked bags, while A-List members and Southwest credit card holders will be allowed one free checked bag. All other passengers will be subject to fees.

How Much Will Checked Baggage Cost?
While Southwest has yet to reveal exact pricing for baggage fees, similar charges on competitors such as Delta, United, and American Airlines begin at $35 per bag.

When Will the Changes Take Effect?
The updated baggage fee policy will apply to tickets purchased on or after May 28.

Why the Sudden Shift?

Southwest Airlines has been under mounting financial pressure to increase profitability, particularly after activist hedge fund Elliott Investment Management acquired a stake in the company last year and pushed for a revised business strategy.

For years, Southwest’s leadership assured investors and passengers that the airline’s free checked bag policy was a fundamental part of its identity and competitive advantage.

However, during an investor presentation in September, the airline disclosed that while charging for bags could generate up to $1.5 billion in additional revenue, it also risked losing $1.8 billion due to a potential decline in market share.

Other Upcoming Changes

Southwest is rolling out several additional modifications alongside the new baggage fees.

• A basic economy ticket will soon be available, offering a lower-cost fare but with strict limitations. These tickets will be non-refundable, prohibit itinerary changes, and will not allow same-day standby options.
• Flight credits associated with these basic economy fares will expire after six months, while credits for other ticket types will now be valid for 12 months. Previously, Southwest flight credits did not have an expiration date.
• In another major shift, the airline plans to eliminate open seating. Instead, it will begin assigning seats, marking the end of a long-standing policy that differentiated Southwest from its competitors.
• The introduction of extra-legroom seating is also on the horizon, as the airline seeks to compete with full-service carriers offering more premium options.

These sweeping changes signal a new era for Southwest Airlines, as it moves away from the policies that once defined its brand and towards a model focused on increasing revenue and shareholder value.