A Southwest Airlines Boeing 737 MAX is pushed back from the gate at San Diego International Airport in San Diego, Aug. 24, 2024.
Kevin Carter | Getty Images
Southwest Airlines announced Tuesday what was once unthinkable: It will start charging customers to check their luggage.
It’s a $300 million gamble. Last year, Southwest said its “rigorous research” found it would lose that much in market share if it started charging bag fees. The policy has set Southwest apart from its competitors for decades.
Getting rid of its famous “two bags fly free” strategy is part of a massive push at the carrier to ditch its long-standing customer perks and policies. Southwest also announced last year that it’s moving from open seating to a single-class cabin in order to raise revenue. Another change announced Tuesday: basic economy tickets that don’t allow free changes.
Here’s what travelers need to know about the new policies:
Who will pay for bags?
Travelers who buy any ticket except Southwest’s top-level Business Select fare will have to pay fees to check bags. Customers who purchase a Business Select ticket will be able to check two bags for free.
Top-tier A-List Preferred frequent flyer program members will also get two checked bags for free. A-List level members will be able to check one bag for free, as will those with a Southwest credit card.
How much will it cost to check a bag?
Southwest didn’t disclose how much it will cost to check a bag, but fees start at $35 apiece on competitors Delta, United and American.
When do the new policies take effect?
The new checked baggage fees go into effect for tickets purchased on or after May 28.
Can I still bring a carry-on bag?
Carry-on bag policies haven’t changed, even for basic economy tickets.
All tickets will include a free carry-on bag, even for the new basic economy tickets.
But won’t everyone else bring a carry-on bag, too?
Southwest told employees on Tuesday, just after the announcement, that customers will “undoubtedly carry on more luggage than before” so it’s taking a few steps to try to keep things moving.
Gate agents will get mobile bag-tag printers “reducing the need for string bag tags” and the company will design new carry-on size guides so customers can see if their luggage fits as a carry on, according to a staff memo from Justin Jones, EVP of operations, and Adam Decaire, senior vice president of network planning, a copy of which was seen by CNBC.
The airline also plans to speed up retrofits of its Boeing 737-800s and Max aircraft to include larger overhead bins.
Will their be longer airport lines?
Possibly. In airport lobbies, Southwest said it could redistribute staff to handle changing customer needs with the new bag rules. It will also equip staff there with mobile printers.
“With an additional step for Customers to pay for bags at the ticket counter or kiosks, we have to plan for longer transaction and queue times, even if fewer Customers are checking their bags altogether,” the executives wrote.
Why is this happening?
Southwest has been under increasing pressure to raise revenue and improve returns after activist hedge fund Elliott Investment Management took a stake in the airline last year and pushed for changes to the carrier’s business model.
Southwest executives have long told Wall Street investors and customers that its “two bags fly free” policy is sacrosanct, something that sets it apart from competitors.
At an investor day in September, the carrier said it would make up to about $1.5 billion if it charged for bags but lose $1.8 billion in market share from the policy change.
What else is happening?
Lots! Southwest is going to launch a basic economy fare that is not refundable and doesn’t allow for changes. It won’t allow for same-day standby tickets.
Flight credits for those “basic” tickets, if unused, will expire in six months while credits for other flights will expire in 12 months. Previously, Southwest credits didn’t expire.
The carrier last year said it plans to start selling tickets with assigned seats, ending its decades-old open-seating policy. It will also soon offer seats with extra legroom, a bid to compete with more full-service airlines.
Southwest Airlines CEO Bob Jordan said Tuesday that the carrier’s executive team thinks the policy changes will drive sign-ups for its co-branded credit card.
He said the new channels the airline is selling tickets through, like Expedia, will help the carrier.
What is happening with frequent flyer miles?
Southwest passengers will earn Rapid Rewards frequent flyer miles based on how much they pay for their ticket. Redemption rates will depend on demand for the flight, a similar model to what other carriers have.
Content Source: www.cnbc.com