Southwest Airlines is dropping its long-standing "bags fly free" policy for most travelers starting May 28, which analysts say could impact customer loyalty. Only top-tier customers will retain the perk of two free checked bags, while some members will be allowed one free checked bag, and others will be charged.
The decision marks a major shift in Southwest's 54-year history and comes amid financial pressures and changing customer preferences post-pandemic. The airline could generate up to $1.5B per year in revenue from baggage fees while losing $1.8B in market share, per a consulting firm's analysis. (In 2023, US airlines collectively brought in $7.1B from baggage fees.) Southwest will also introduce assigned seating, extra legroom seats for a fee, and a basic economy fare class. Southwest shares closed up 8% yesterday.
In related news, Delta Air Lines, American Airlines, and Southwest lowered their financial forecasts for the first quarter of this year, citing bad weather, plane crashes, and less consumer spending.
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