After Ditching Open Seating Policy, Troubled Southwest Airlines Will Now Remove Bags Fly Free

Budget carrier Southwest Airlines built a strong reputation by appealing to budget-conscious travelers with its popular bags fly free policy. But as the airline faces pressure to increase profitability, it’s beginning to reconsider some of the perks that set it apart. Recent moves by Southwest, driven by investor demands, could lead to significant changes that aim to boost revenue—but at what cost to passenger loyalty?

Balancing Profit and Loyalty: The End of Bags Fly Free?

For decades, Southwest Airlines has been the only major U.S. carrier offering two free checked bags for every passenger. This perk has saved travelers significant amounts of money and contributed to Southwest's appeal as a passenger-first airline. Now, however, with Elliott Investment Management holding over 10% of the airline’s stock, there's growing pressure to monetize this service.

From an investor’s standpoint, eliminating free checked bags represents an untapped revenue stream. Analysts estimate that charging between $30 and $50 per bag could generate tens of millions of dollars annually. This would offer a much-needed boost to Southwest's profitability, especially as the airline faces shrinking margins and rising operational costs. But investors must weigh the potential gains against the risk of alienating Southwest's loyal customer base, who have come to expect these passenger-friendly policies.

The Passenger Backlash: How Will Customers Respond?

Passengers are already expressing frustration over the possibility of losing the bags fly free perk. For many, this policy is a primary reason they choose Southwest over competitors like Delta and United, who charge for checked luggage. Social media is buzzing with concerns about the airline becoming just another fee-driven carrier. Long-time flyers worry that the removal of this perk would make Southwest indistinguishable from its rivals, reducing the appeal of flying with the airline.

Southwest's commitment to customer-friendly policies has been a key differentiator in the market, and removing the bags fly free perk could have a long-term impact on customer loyalty. It’s not just about saving money—travelers see this policy as part of Southwest’s identity. By removing it, the airline risks losing the very passengers who have fueled its growth.

Open Seating Changes: More Profit, More Passenger Frustration

But wait, there’s more! In addition to reconsidering the bags fly free policy, Southwest has already made another significant change: eliminating its open seating policy. Traditionally, passengers could choose their seats on a first-come, first-served basis, but now Southwest plans to assign seats for a fee. This move opens the door for premium seating charges, similar to those offered by other airlines, where passengers can pay extra for early seat selection or additional legroom.

From an investor’s perspective, this shift allows Southwest to tap into new revenue streams and offers more ways to generate profits beyond ticket sales. Airlines like Delta and American have already profited from charging for seat assignments, and Southwest is now looking to do the same. But once again, these changes could erode customer goodwill, especially among passengers who valued the airline’s simple, no-nonsense approach to flying.

The Investor's Perspective: Revenue Opportunities in a Challenging Market

Southwest has faced a tough few years, with its stock price down over 50% in the last three years. The airline has struggled to maintain profitability amid rising costs and operational challenges, including delays in Boeing’s jet deliveries. As a result, investors are eager for the airline to explore new revenue opportunities, and changes like charging for baggage and seat assignments are seen as low-hanging fruit.

By implementing these changes, Southwest could potentially boost its bottom line and return value to shareholders. In fact, some analysts predict that these moves could bring in hundreds of millions of dollars annually, providing much-needed financial stability. Elliott Investment Management, which has taken an 11% stake in the airline, has made it clear that it wants to see significant commercial changes. For investors, the question is whether these revenue-generating strategies will be enough to turn Southwest's fortunes around.

Will These Changes Pay Off in the Long Run?

While these changes offer a clear financial upside, Southwest runs the risk of losing its loyal customers, who have grown accustomed to policies like bags fly free. The airline has long relied on repeat business from budget-conscious travelers, and shifting away from this model could drive passengers toward competitors. Investors must weigh the potential revenue gains against the potential loss of market share.

Ultimately, Southwest is at a crossroads. It needs to find a balance between generating profits and maintaining customer loyalty. While changes like removing the bags fly free policy and charging for seat assignments may satisfy investors in the short term, the airline must carefully consider how these moves will affect its long-term brand and customer relationships.

What do you think of Southwest Airlines’ plans to eliminate the bags fly free policy? Will it generate more revenue for the company? Or, will negative backlash to these new policies put an end to years of loyal patronage?