Southwest Ends 'Bags Fly Free' Policy After 50 Years — Here's Who Still Gets Free Checked Luggage

Southwest Airlines announced on Tuesday that it will begin charging for checked bags on most fare types, ending its unique "bags fly free" policy.

The new move, set to take effect on May 28, marks a major shift in the airline's business model as it struggles with lower earnings, Reuters reported.

For years, the Texas-based carrier has been known for allowing passengers to check two bags for free—a rare offering in the airline industry. This policy helped the airline stand out for more than 50 years, as it was the only major U.S. carrier not charging for checked bags. But with the airline facing financial challenges, it is now reversing this customer-friendly policy.

Last year, Southwest also made another big change, announcing it would end its open seating policy, which had been part of its brand for over 50 years. The recent shifts are expected to impact the carrier's reputation and could result in the loss of loyal customers.

What Is The New Policy?

Under the new baggage policy, passengers with the highest loyalty status—A-List Preferred, who pays most premium fare—will still be able to check two bags for free. Those in the A-List group will get one free checked bag.

Passengers who have Southwest's co-branded credit card will also get one free checked bag. However, most other passengers will now be charged for their first and second checked bags.

Pressure From Investors

The decision to end the free checked bag policy comes after months of pressure from Elliott Investment Management, an activist firm that bought a stake in Southwest last year, reported CNBC.

The firm has pushed for the airline to make changes to improve its financial performance, including reducing costs and increasing revenue.

Southwest CEO Bob Jordan explained that the airline's new booking data no longer shows the same benefit from the free-bag policy.

"We carry nearly two times the bags as compared to the competition, which is costly on many fronts," Jordan stated.

Based on the company's analysis, though charging for checked bags could generate revenue up to $1.5 billion annually, the move would result in a $1.8 billion loss in market share.

While baggage fees brought in over $7 billion in revenue for major U.S. airlines in 2023, Southwest, however, earned only $73.4 million, according to the Bureau of Transportation Statistics.

Cutting Costs To Increase Profits

As part of a broader effort to improve its financial position, the airline has also laid off workers for the first time in its history. Additionally, the company launched a new basic economy fare, and stopped hedging against fuel price changes, which cost the airline $150 million last year.

Jordan expects the new baggage policy to boost sign-ups for its co-branded credit card and expand its commercial reach by listing its tickets in platforms like Google Flights and Expedia.

Jordan's goal is to raise Southwest's operating margin to at least 10% by 2027, up from just 2% in 2024.

Meanwhile, Southwest's policy change has already caught the attention of its competitors. Delta Air Lines president Glen Hauenstein noted that some of Southwest's customers are now up for grabs.

United Airlines CEO Scott Kirby called the change "the slaying of a sacred cow," saying it will mainly affect lower-paying passengers. "I view it as a big deal because it's more — it feels more financially driven — a results-driven airline than it's ever been before," he said.