Southwest Airlines Ends Free Checked Bags, Adds Fees

Southwest Airlines (LUV.US) is set to discontinue its popular policy of allowing two free checked bags per passenger, effective from May 28. This decision comes as the airline faces significant financial pressures and seeks to enhance its revenue streams. According to an internal memo, the first checked bag will now cost $35, and the second will cost $45, aligning with the baggage fee structures of other major airlines.

Passengers with the highest tier memberships will still be able to check two bags for free, while those with the airline's credit card or lower-tier memberships can check one bag without charge. Additionally, the highest fare class will continue to offer two free checked bags. Passengers who booked their tickets before May 28 will not be affected by the new fees unless they change their flight after the policy takes effect.

This shift marks a significant change for Southwest Airlines, which has maintained a free checked baggage policy since its inception over fifty years ago. The decision to eliminate this perk comes under pressure from activist investor Elliott Investment Management. The airline had previously lowered its financial guidance in March, citing a weakening macroeconomic environment that has led to softer booking trends and demand.

In addition to the baggage fee changes, Southwest will introduce a new Basic Economy fare, which will be non-refundable and non-changeable. This fare class will replace the "Wanna Get Away" fare as the airline's most affordable option. Southwest's Chief Financial Officer, Tom Doxey, stated that the new baggage fees will generate incremental revenue and that the airline will also realize cost savings due to reduced baggage handling.