Apart from charging for bags, Southwest Airlines is also introducing a basic economy fare and modifying reward points|Jonathan Cutrer|CC BY-NC 2.0
Southwest Airlines will start charging for checked bags for the first time beginning May 28, ending its long-standing “Bags Fly Free” policy that set it apart from rivals for over five decades.
Executives have long said they do not plan to charge flyers for bags as it was one of the main reasons customers chose the airline. At an investor day in September, the company said that if it started charging customers for bags, it would gain between $1 billion and $1.5 billion but lose $1.8 billion of market share.
The decision comes as the carrier faces increased pressure from activist Elliott Investment Management, which took a stake in the company last year and has five board seats. The firm has been pushing the airlines to make changes to the business model so it doesn’t miss out on revenue.
Last month, Southwest cut more than 1,700 jobs, roughly 15% of its corporate staff. It has also let go of unprofitable routes and canceled summer internships to save costs.
The aviation industry is already anticipating a tough year, and major airlines have slashed their earnings estimates due to mounting economic uncertainty, which has led to a pullback in corporate and consumer spending.
Apart from charging for bags, the airline is also introducing a basic economy fare and modifying reward points—offering more points for higher-priced seats while reducing points for cheaper fares.