On February 18, a Southwest Airlines jet was preparing to land at Chicago Midway International Airport. In a significant shift, Southwest Airlines will soon begin charging passengers for checked bags, marking a departure from its long-standing practice of offering this perk for free. This decision, driven by a desire to boost revenue, comes after pressure from activist Elliott Investment Management, which secured board seats and advocated for swift changes within the company.
Starting May 28, passengers booking tickets with Southwest will need to pay for checked bags, with exceptions for elite frequent flyers and cardholders. This move aligns Southwest with its competitors, who collectively earned $5.5 billion in bag fees last year. The airline, known for its “two bags fly free” policy, now acknowledges the need for additional revenue to cover costs, despite previously touting free bags as a top reason for customer loyalty.
In addition to the baggage fee changes, Southwest will introduce a basic economy fare and adjust its Rapid Rewards program based on spending levels. Flight credits will now expire within a year, reflecting a shift towards dynamic pricing and cost-cutting measures. These adjustments are part of a broader strategy overhaul at Southwest, including the recent shift from open seating to assigned seats and the introduction of premium seating options.
Last month, Southwest made a significant announcement regarding its workforce, with approximately 1,750 jobs being cut, representing around 15% of its corporate staff. The majority of these job losses occurred at the company’s headquarters, marking a decision that CEO Jordan described as “unprecedented” in the airline’s 53-year history.
CEO Jordan stated that Southwest is currently undergoing a critical transformation to become a more efficient and adaptable organization. Earlier this year, the airline also saw changes in its leadership team, with the retirement of long-serving finance chief Tammy Romo, who was succeeded by Breeze executive Tom Doxey, and chief administrative officer Linda Rutherford, both of whom had served at Southwest for over three decades.
Furthermore, Southwest has taken additional measures to improve its financial performance, including the discontinuation of unprofitable routes, summer internships, and longstanding employee team-building events.
