Months after ditching its open seating coverage, Southwest Airways is ending its most recognizable perk: Free checked baggage.
The airline will start charging for the primary and second checked bag starting on Could 28, Southwest introduced Tuesday. Nevertheless, members of its A-Record loyalty program or these touring on a enterprise fare might be exempt from the charges.
“We now have super alternative to satisfy present and future buyer wants, entice new buyer segments we do not compete for immediately, and return to the degrees of profitability that each we and our shareholders count on,” stated Bob Jordan, CEO of Southwest, in a press launch.
It is a seismic shift for the Southwest, which has all the time supplied free checked baggage for the reason that airline began about 60 years in the past and stored the coverage in place when its rivals beginning including and growing charges. In reality, the service has trademarked “baggage fly free” slogan and it has been a key a part of its promoting.
Jordan instructed traders on an analyst name final yr that it had no plans to begin charging for the primary two baggage being checked. He stated the no charges for the primary two baggage is “an enormous a part of what attracts individuals to Southwest.”
“After fare and schedule, baggage fly free is cited because the primary subject when it comes to why clients select Southwest. So, it is not one thing into consideration proper now,” Jordan stated on the time.
He additionally stated that there are prices, and never simply income, that come from charging for luggage. It slows the time it takes to load a aircraft as passengers take extra time to search for area in overhead bins for carry-on baggage. Additionally, some baggage need to be moved from the cabin to the cargo maintain as soon as there is no such thing as a longer any room accessible within the overhead bins.
Southwest did not instantly reveal how a lot the checked baggage will price. Whatever the value, it should seemingly immediately increase its backside line as a result of Southwest has two to a few instances as many checked baggage as different airways.
Shares of Southwest (LUV) soared almost 6% in premarket buying and selling.
Modifications at Southwest
Southwest has launched plenty of modifications since Elliott Funding Administration took a $1.9 billion stake within the service final yr. The activist investor referred to as for management modifications and an operations overhaul to spice up profitability.
Different hallmarks that Southwest has modified embody its cabin. Assigned seating will quickly be launched, in addition to premium seats, bringing it consistent with conventional carriers. The airline additionally rolled out red-eye flights.
Southwest stated clients have been clamoring for these modifications. When individuals swap to a competitor from Southwest, the corporate stated the No. 1 cause passengers cite is open seating. However the change can even assist the corporate cost some passengers extra for his or her tickets.
The airline has additionally modified the way in which it sells tickets. Historically it solely offered them on Southwest.com, however lately stated they’d promote them on Expedia in an try to draw extra clients.
Southwest additionally introduced Tuesday it should additionally begin promoting “fundamental financial system” fares in Could, that are low-priced tickets however with tons of restrictions.
Final month, Southwest minimize 15% of its company workforce, or 1,750 individuals – the primary mass layoffs within the firm’s historical past. The layoffs will save the corporate $210 million this yr and $300 million in 2026.
The corporate began the yr with a brand new chief monetary officer, Tom Doxey, who most lately was president of Breeze Airways. Southwest’s earlier chief monetary officer Tammy Romo and chief administration officer Linda Rutherford will retire from their positions in April.
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