| Bags Will No Longer Fly Free on Southwest Airlines -- WSJ |
|
|
| Dow Jones Newswires March 11, 2025 06:35:00 AM ET
Southwest Airlines plans to start charging for checked bags, a seismic shift that will boost revenue but potentially give its fiercely loyal passengers a reason to shop around.
"Bags fly free" was a policy so sacrosanct that Southwest trademarked the phrase and devoted a section of a book celebrating its 50th anniversary to it.
For bookings made on or after May 28, only customers with the airline's top loyalty status and those buying its priciest tickets will be allowed to check two bags free. Travelers with the airline's next level of status or a Southwest credit card are allowed one free checked bag.
Others should prepare to pay. Southwest didn't say how much travelers will pay to check bags.
The checked-bag fees were among several changes that the nation's largest carrier of domestic passengers announced Tuesday. Southwest is adding a bare-bones fare similar to its rivals' basic economy tickets, with restrictions galore, including no advance seat assignment.
And flight credits will now have an expiration date. The airline eliminated expiration dates during the pandemic and has frequently touted the policy.
"I'm not trying to spin it as a very big positive for everybody, but we did try to protect our engaged customers here," Chief Operating Officer Andrew Watterson said.
Checked bag charges and basic economy tickets have been standard at other airlines for years, but Southwest resisted them as too punitive. As recently as September, executives were steadfast in defending their bag policy, describing it as a critical "moat" that set Southwest apart from rivals.
The company's capitulation reflects how industry dynamics have shifted: The airline that once upended industry norms is now facing pressure to adopt them.
Southwest has lagged behind competitors and promised investors it will deliver stronger financial performance. A tussle last year with Elliott Investment Management gave the activist's chosen directors a significant presence on Southwest's board.
The airline has already been whittling away at some of its most distinctive features, last year saying it would ditch open seating and redesign plane cabins to sell some with extra legroom. Its vaunted employee-first culture suffered a body blow last month when the carrier slashed 1,750 corporate jobs in its first mass layoff.
Sticking to its values
Last year, as it worked to fend off Elliott's campaign, Southwest executives argued that customers flocked to the airline specifically because they can check their luggage, golf bags, skis and musical instruments for no charge.
Executives cited an analysis by a consulting firm that determined bag charges would bring in at most $1.5 billion in revenue a year, but cost the airline $1.8 billion in lost market share. Free bags ranked just behind price and schedule among the top reasons travelers pick Southwest, executives said then.
"Changing our bags policy would be value destructive," said Ryan Green, who was then in charge of the airline's transformation strategy, at the airline's investor day in September.
Board members were skeptical of that conclusion, according to people familiar with the matter. Some of them had experience at airlines that charged for bags. And where else would customers go, they reasoned?
Executives recognized they needed to speed up financial improvements and everything had to be on the table.
Airline tickets generally used to include checked bags. That changed by 2008 as major airlines looked for a way to cover soaring fuel costs.
Prices vary but checking two bags now costs at least $75 each way on most major airlines. That has been a windfall for the industry, which raked in $7.1 billion from baggage fees in 2023, according to the latest government data.
Southwest's bag policy became central to its identity. Its ads often needled competitors over their pesky charges. One ad from 2010 featured ramp workers flashing "Bags Fly Free" spelled out in body paint on their stomachs at another plane. The "belly brigade" later made an appearance at Southwest's annual shareholder meeting.
Bob Jordan, when he became CEO in 2022, said he had no intention of changing course. Southwest renewed its trademark as recently as 2023 and promoted the policy in ads and marketing materials in recent months.
"You cannot be stubborn about change," Jordan said last summer. "At the same time, we're going to stick to our values."
Fishing in 'new ponds'
In recent months, executives have acknowledged that the airline has been missing out on opportunities to make more money from premium features.
It has also been losing bargain hunters. Southwest allowed its flights to be displayed on Google Flights last year and this month started selling tickets on travel booking giant Expedia, reversing its yearslong policy of directing travelers solely to its website. Travelers can easily see how Southwest's prices stack up against competitors.
"We went fishing for new customers in new ponds," Watterson said. "They did not react to the bundled pricing."
Some loyal Southwest customers thought the airline had already gone too far, even before the latest changes were announced.
"Assigned seating and seat-based pricing makes you just like all the others who are no fun at all," said George Jones, a retiree who has flown Southwest for decades. Referencing the company's stock ticker, he asked: "What happened to the LUV?"
Write to Alison Sider at alison.sider@wsj.com and Dawn Gilbertson at dawn.gilbertson@wsj.com |
|
