Southwest Airlines has announced the end of Bags Fly Free, the primary benefit separating it from competitors – and idea they have consistently rejected.
Together with cutting points-earning by two-thirds on the fares most customers buy, Southwest now says they will offer basic economy fares – something they said they would never do.
- The airline is walking away from its unique selling proposition
- At precisely the time in the industry that product differentiation, rather than just schedule and price, has started to matter most.
Effective May 28, bags fly free is over. A-List Preferred and Business Select fares will receive two free checked bags. A-List members and co-brand credit card customers will receive one free checked bag.
I wrote two weeks ago that this was coming and suggested it could be on the way back in September.
- The head of the airline’s transformation stepped down. He had disagreed over bag fees.
- The airline was moving to list its flights on travel agency websites like Expedia, so wanted to shower lower fares – unbundled from free checked bags.
- And the federal government’s rule about showing prices inclusive of a checked bag was overturned.
The tax code encourages airlines to charge separately for checked bags, and Southwest Airlines was easily leaving $75 million in tax savings on the table each year by refusing to do so.
Here are the actual problems Southwest Airlines faces:
- Southwest hasn’t had the flights people wanted to buy. The airline flies largely domestically, with some close-in international. They haven’t been able to take advantage of the boom in long haul international. They don’t even have partners to sell flights on that would help here.
The airline only flies Boeing 737s. They can’t take advantage of demand from small cities. There’s been too much domestic capacity, and that’s hurt domestic-focused American Airlines. But American Airlines has regional jets that connect passengers out of small towns and fill up larger planes, while Southwest Airlines can’t.
- Southwest hasn’t had partnerships and couldn’t sell tickets to far flung destinations that its customers wanted to buy, and was losing out on revenue that foreign carriers would bring when their passengers needed U.S. domestic flights.H
- Southwest hasn’t had the product people wanted to buy. The past couple of years air travel has seen significant growth in premium demand. But Southwest doesn’t have extra legroom seats or first class. They don’t have lounges. Their business model was built to be efficient and egalitarian.
- Southwest hasn’t had the distribution insisting on selling its flights almost exclusively through its own channels. As the airline expanded to new cities, customers in those cities didn’t know to go look for Southwest flights. Adding Expedia, Google Flights, et al addresses this, but makes Southwest look more expensive than major airline basic economy, hence the pressure to unbundle.
Each change that Southwest needed to make adds complexity and cost, and the airline has already seen rising costs especially labor. They became bloated. So the Elliott Management case that something was broken was strong. The solution? They simply said ‘become like JetBlue and American Airlines’ with checked bag fees and basic economy, which is a recipe for financial underperformance at JetBlue and American Airlines. Of course making the case for change has meant financial shenanigans like selling planes (and in some cases leasing them back) to raise borrowed cash for share buybacks.
And while they did become top heavy with staff, they’ve had a hiring freeze which could have reduced head count. Instead they reverted to mass layoffs for the first time in their history after cutting investment in employee morale-building events.
The airline’s CEO Bob Jordan has essentially capitulated to activist investor Elliott in order to save his job, but at the expense of the airline’s culture and product differentiation. These changes won’t make Southwest Airlines better. Southwest had problems – Elliott and everyone else in the world observing them were not wrong – but there are no solutions to bring Southwest back to its earlier growth days because the model has simply run its course.
They have maxed out the ability to grow with a single fleet type, distributing tickets through their own channels, going it alone with a simplified product. So any future will be a lower growth, lower stock multiple, less valuable one. But that doesn’t have to mean doubling down on the race to the bottom, which is why it’s sad to see today’s change.
Jordan bizarrely claims these changes – giving customers less – will attract more customers, steal underpants, and generate profit.
We have tremendous opportunity to meet current and future Customer needs, attract new Customer segments we don’t compete for today, and return to the levels of profitability that both we and our Shareholders expect. We will do all this while remaining focused on what’s made us strong — our People and the authentic, friendly, and award-winning Customer Service only they can provide.
Ultimately what this underscores is that there is no returning to the differentiated airline business model that gave Southwest significantly higher earnings multiples, catapulting their stock beyond peers, and generating decades of consistent profits.
Nobody had solutions to be like they used to be, so they gave up and did what everyone else does which is what company executives do to protect their jobs. They stopped sticking their necks out, because they might get chopped off. Southwest is now just like everyone else, but a bit less (they don’t even plan to sell blocked middle seats, let alone first class, and have less valuable miles). A moment of silence for this once great company.
Not sure what the value proposition will be to particularly infrequent flyers over the ULCCs. Had Southwest did this years ago it would have worked but after what nearly 20 years the airline is doing an about face? On the high end, if I can afford first class or cash upgrades why would I ever fly a cattle car airline?
I think eventually Southwest will merge with one of the legacies and the merger will be allowed as it will be seen as a move for survival. Right now it’s a high cost airline with no premium demand.
I also read that that Flight credits issued for tickets purchased on or after May 28, 2025 will expire one year from ticketing date for all fares except Basic, which will expire six months from ticketing date. This is an unfriendly change.
Don’t see a reason to fly SW anymore. Their flights cost as much or more on most routes as it is. So, adding seat and bag fees is a bridge too far. Plus the mile earnings are below competitors. SW is now just like the Big 3… except the Big 3 has better fares and mile earning ability.
The end of an era that is for sure, this is not going to be well received by the public, a major incentive to fly Southwest is gone.
The only thing that’s keeping me around is their Companion Pass. If that goes away, so will I.
This asshole is structuring the death knoll for Southwest as it’s loyal customer base will depart and Southwest will morph into a Spirit/Frontier model. After 35+ years of flying Southwest I will be looking elsewhere when I fly.
Man, I’m mourning the loss of WN. I’ve basically only flown them or Delta for most of the last decade. As a Minnesota based flyer, it’s harder to fly WN due to their decentralized route map, but for me, there were plenty of times it made sense to make the effort. The free bags were very nice, but sometimes I didn’t even check one, I just rocked carry-on knowing that bin space would be more than available because many others would check a bag for free. Southwest slowly went from being a low cost option (remember the Southwest effect days?!) to being one that was on par or a touch higher than competitors’ economy tickets but it was many times worth it for the free bags, available bin space, easy to earn and use rewards points, and ease of boarding. I also got many family members into their credit card ecosystem because it was easy to explain to them & they could easily redeem for flights. My parents once even achieved a companion pass for a year, flying to see my sister in FL so often.
Now the new Southwest board is telling me that they are switching to offer me basic economy, no free bags, I’m sure a terrible boarding new board process with 13 different board zones, and barely any rewards points for doing so. Oh, but they’re keeping the lack of 1st class option (when I choose Delta it is normally because I pay for 1st), the same indirect routes that take me through terrible airports like Midway, with no lounge availability and no international options to spend my points at.
Oh, and they’re going to accomplish these paid check bags & 13 boarding zones all while still trying to charge a premium AND somehow turn planes 5-10 mins faster. Did I get that right?
Hell no, I’d rather fly Spirit (while they exist). At least I can get a direct flight & a big front seat.
Southwest is screwed.
When Colleen Barrett passed away, and almost immediately the Predator swooped in, the writing was on the wall. They care nothing about the Airline itself, the employees, or the Customers of Southwest Airlines. They are here for the destruction and to divide the spoils. It is a sad day for Company as the loyal Customers of Southwest Airlines will now be seeking other Airlines to give their business to. I have flown them for over 30 years and rarely, only out of necessity, have I flown other carriers. That will now change along with my choice of Credit Card.
In the words of George Harrison:
“All things must pass, all things must pass away”
Elliot is just doing what Elliot does. The real problem is that the institution investors have not banded together to stop them.
These changes will just push Southwest to look more like a ULCC in an environment where ULCCs are trying to go in the opposite direction, such as with Frontier adding first class seats. Southwest won’t have the lounges or seat back TVs offered on legacy carriers, while simultaneously not having the same cost advantage necessary to complete with ULCC pricing. I assume the winners of these changes will be United, Delta, and Frontier as customers will either choose a premium product or choose to pay less for an identical product. This could explain why Southwest has been reducing flights from their Denver hub as customers may slowly be switching over to competitors.
You misspelled “stripped for parts.”
SWA is forging ahead to mediocrity, the have become just like everyone else. Keeping in mind that being “like” everyone else is NOT a good thing. Less reasons to fly SWA now. I cannot believe I am saying this. I am a million miler with AA and I am thinking about going back… wow… Not feeling luved.
Don’t expect points to be as valuable.. Noticed Southwest wrote this in the email:
“We will also begin to vary our redemption rates across our fare products on some high- and low-demand travel periods. ”
If fares are already aligned with demand, why should point values in a revenue based system be variable?
When Gary reported in December 2024 that Southwest was planning assigned seating starting in 2026, we knew the days were numbered for the ‘two free checked bags’ policy. However, this May 28, 2025, is much sooner than expected for the bags.
@jns — So true. And @Denver Refugee is also right–Elliott is stripping this once-great airline for parts. Their greed is insatiable. A tragedy to passengers and workers, alike.
@Mike P — You must be a different ‘Mike P,’ because you actually shared something meaningful, whereas the other ‘Mike P’ just comes on here to trash unions and share silly quotes. Regardless, I share in your mourning of WN.
Why is everyone getting the vapors and clutching their pearls? This is EXACTLY what VC and activist investors do. They come in, force a focus on profit over everything else and care not who or what is impacted along the way. The dildo of reality seldom comes lubed.
Don’t see the big deal. Their rates haven’t been cheap in years. Their reward program wouldn’t take you internationally and still won’t. Checked bag has been solved at other carriers with credit cards. The only thing that would make me fly WN is direct flight on a random route like PSP – LAS or if someone was paying the fare for me like last year when I flew LAX – BWI. I hit the Centurion lounge hard before I walked to T1 for that flight. The seats were hard maybe because I was in exit row? By the time I got on all the good seats up front were taken by faux early boarders even though I was on a BS fare with A3 position. Only a sucker would pay that fare without assigned seating.
Years ago, Southwest was our go-to airline. The flights were reasonable, and the flight attendants were fun (and funny). We often drove a couple of hours from our home to catch a route that wasn’t available nearby. Our love for SW ended a few years ago when I purchased an extra seat by telephone for my husband, who would be post-surgery. The verbal abuse we received from SW personnel on the day of our flight was egregious at best, especially since we had a legally issued SW ticket for an extra seat. The abuse began in Pittsburgh and occurred again during an unscheduled plane change in Baltimore. We were told our ticket was illegal and that only people of size were allowed an extra seat. Because my husband had no visible injury, he was forced to show the desk agents his incision. When the same scenario unfolded in Baltimore, and I endured a screaming SW employee insisting he had to “fix” our “illegal” ticket before we could board, we knew then that SW was doomed. The only saving grace was a gate agent who refused to close the boarding door until we were on the plane (35 minutes late). An airline that is not accountable for their errors, that allows ground staff to insist that everyone is a supervisor and that the customer is the problem, cannot survive. Although we immediately filed a formal complaint with SW, we received no reply until we threatened to file a DOT complaint. SW was the airline of our family trips with children and grandchildren…..we had many great memories of flying SW, all of which were wiped out in one horrible night. The latest round of SW changes is merely another nail in their coffin.
@UnitedEF — Those point-to-point direct routes are indeed a primary reason to pick Southwest, even over the legacy carriers if we have status (because who honestly ‘wants’ an unnecessary stop in Atlanta, Chicago, or Dallas). That, the affordable fares (which are indeed harder to find), and the consumer-friendly policies (but now those are disappearing, too). As others have said before, this looks like Elliott Management is setting the airline up to ‘fail’ so it can be merged. That outcome is bad for consumers because competition will inevitably decrease. It’s painful to watch because we’ve seen this happen before and it usually ends poorly for us. It only benefits the executives and majority shareholders–everyone else, passengers and workers, pay the price.
Checked bags should cost money. Carry-ons should cost even more. Provides a strong incentive to travel light and might finally create a market for third-party baggage delivery services.
Unless you’re close to an airport where WN has over two-third’s market share or the non-stops you want, there is no point for flying them anymore. Just another airline.
haven’t seen the price for checked bags yet. probably the next bombshell.
Southwest doesn’t have the flights and product people want to buy. You’re written that over and over Gary.
CRAP!!!
If that’s the case, why have they consistently made money?? Why are their planes full??
MAYBE they have JUST the product people want who don’t want or need (or think they need) lounges and all the other frou-frou the other airlines have.
I want a ticket on a clean plane that gets me from point A to point B safely. I don’t need nor want some little tapas plate at an overcrowded bougie lounge in the middle of an airport.
As long as they introduce a nice, comfortable, full-service domestic first class product and price it well, they could nave no mileage program at all for all I care. It sucks that they take up ~90% of the gates a DAL and have no true premium offering whatsoever.
I actually called Chase to complain. I put substantial spending on my Chase Southwest card and that will dissolve if Southwest keeps going or screws the Companion Pass.
Once Elliott Management wrings all the cash possible out of SWA they will discard it – not sure whether that will make things better but I can hope.
So what is WN now? A standard airline with a bad frequent flyer program, very limited international flights with a mediocre hard product and avergeish prices? I really don’t get it, or see what competitive advantages they can try and claim now.
They lost their only differentiator from other airlines. Between this and points devaluation, I will not be renewing my credit card.
Stop all the weeping and gnashing of teeth! Southwest lived in their own (largely by legislation – Love Field) world for decades. It’s way past time they are forced into playing onto a level field with its competitors.
The stockmarket has called the bluff of bloggers. $LUV up 8%!
Pay for bags, now mile for Dollar has been reduced to 50% time to look at other airlines
A dark day indeed for Southwest.
Live in Chicago suburbs. Family still near IAD. No direct flight anymore, and the crew at MDW has a bad apple in baggage claim. I’m glad SWA will be on the fare sites. I’m leaving, not LUVing!
@Ed $LUV down 10% year to date
Southwest has 90% of the routes I fly. Most ordinary citizens aren’t flying frequent, long-haul international routes anyway, and that’s not what makes up the bulk of air traffic in the US anyway. Is the small town market significant? If it was, airlines like American wouldn’t be contracting them out under partnership brands. Additionally, Southwest’s offerings to Hawai’i and the Caribbean have been amazing deals for quasi-long haul vacations.
The focus on 737s and scaling a standardized fleet is still a net benefit. Again, the small-market airports are probably not where the margin is made, unless the US population has been decentralizing way faster than I’ve realized. Just because other airlines have scaled their larger-market operations more efficiently to compete with Southwest doesn’t mean that Southwest’s model was broken.
The Southwest product is fine, with the exception of people faking wheelchair needs to board first, as well as anti-social seat-saving or seat-discriminating behaviors. Fine, solve it with assigned seats. Most of us don’t need to pay for extra leg room or first-class. It’s just a short- to medium-haul, non-luxury flight, which is what Southwest was perfect for.
The real product is relatively inexpensive short-haul flights, free checked bags, and extremely flexible ticketing/flight credit logistics online. Hassle-free cancelations for flight credit? Amazing! Does Southwest get to act like a bank and hold our money, interest-free? Yes, and they should love that.
I don’t think Southwest needs distribution. A good geographically targeted online ad campaign will take care of any perceived lack of brand recognition. This is the 21st century; it’s not like people don’t hear about their local airport adding or losing an airline.
Southwest wasn’t perfect, but it was a great balance for budget and convenience if you planned ahead. Their customer service was pretty good too, at the gate and on the phone. Every other airline makes you pay to travel conveniently, and I guess this is the way that private equity has paved. Their lack of tech investment led to their recent debacles, which is a shame since the tech they needed isn’t really niche. Sic transit gloria mundi.
With even more people bringing carry-ons to avoid the fees, good bye quick turn arounds, and welcome no overhead space.
I am a retired employee (32 years there) from one of the 3 majors. Let me just say I saw and have continually witnessed the slide down the hill by my past airline. In retirement life I have only flown on Southwest. I bemoan their executives choosing to follow my ex-airline to the bottom of the hill. I mourn for their employees, and I will miss you, Southwest!
Charging for checked baggage is only going to cause the same carryon baggage problems the other airlines have. It is going to be hard to turn planes around quickly when people are fighting for bin space then taking their time getting their stuff off. Charging for carryon and making checked baggage free would speed up loading and unloading greatly. And the tax advantage of having bag fees being separate should be done away with, but won’t happen with this Congress and this Administration.
This is money grab – plain and simple. Screw its loyal customer base for as long as possible then bail. Followed by leaving a new management and/or bankruptcy court with the mess.
The only thing they have not done to mimic every bankrupt airlines business model is create a customer support that thinks they speak English. But, rest assured, that’s coming – soon.