It\u2019s happening:\u00a0Southwest Airlines\u00a0will start charging passengers to check bags for the first time.<\/p>\n
It\u2019s a stunning reversal that shows the low-cost pioneer is willing to part with a customer perk executives have said\u00a0set it apart\u00a0from rivals in more than half a century of flying in hopes of\u00a0increasing revenue.<\/p>\n
Southwest\u2019s changes come after months of pressure from activist\u00a0Elliott Investment Management. The firm took a stake in the airline last year and won five board seats as it\u00a0pushed for quick changes\u00a0at the company, which held on for decades \u2014 until now \u2014 to perks such as free checked bags, changeable tickets and open seating.<\/p>\n
For tickets purchased on or after May 28, Southwest customers in all but the top tier-fare class will have to pay to check bags, though there will be exceptions. Elite frequent flyers who hold \u201cA-List Preferred\u201d status will still get two bags and A-List level members will get one free checked bag. Southwest credit card holders will also get one free checked bag.<\/p>\n
\u201cTwo bags fly free\u201d is a registered trademark on Southwest\u2019s website. But its decision to about-face on what executives long cast as a sacrosanct passenger perk brings the largest U.S. domestic carrier in line with its rivals, which together generated $5.5 billion from bag fees last year, according to federal data.<\/p>\n
Southwest executives have long said they didn\u2019t plan to charge for bags, telling Wall Street analysts that it was a major reason why customers chose the airline.<\/p>\n
\u201cAfter fare and schedule, bags fly free is cited as the No. 1 issue in terms of why customers choose Southwest,\u201d CEO Bob Jordan said on an earnings call last July.<\/p>\n
But Southwest has changed its tune.<\/p>\n
\u201cWhat\u2019s changed is that we\u2019ve come to realize that we need more revenue to cover our costs,\u201d COO Andrew Watterson said in an interview with CNBC about the baggage fee changes. \u201cWe think that these changes that we\u2019re announcing today will lead to less of that share shift than would have been the case otherwise.\u201d<\/p>\n
In September, Southwest\u2019s then-chief transformation officer, Ryan Green, told analysts that its analysis showed Southwest would lose more money from passengers defecting to rivals if it started\u00a0charging for bags\u00a0than it would make from the fees.<\/p>\n
\u201cThe fact that free bags is a key driver of choice creates the risk that customers may choose the competition if we change the policy,\u201d he said.<\/p>\n
Southwest said last month that it had\u00a0parted ways\u00a0with Green.<\/p>\n
The airline also said Tuesday that it will launch a new, basic economy fare, something\u00a0rivals\u00a0have offered for years.<\/p>\n
Southwest, in addition, will change the way customers earn Rapid Rewards: Customers will earn more of the frequent flyer miles depending on how much they pay. Redemption rates will vary depending on flight demand, a dynamic pricing model competitors use.<\/p>\n
And flight credits for tickets for tickets purchased on or after May 28 will expire one year, or earlier, depending on the type of fare purchased.<\/p>\n
It\u2019s the latest in a string of massive strategy changes at Southwest as its performance has fallen behind rivals.<\/p>\n
Last July, Southwest shocked passengers when it announced it would ditch its\u00a0open seating model\u00a0for assigned seats and add \u201cpremium\u201d extra legroom options, ending decades of an single-class cabin.<\/p>\n
The airline is also looking to slash its costs. Higher expenses coming out of the pandemic have taken a bite out of airline margins.<\/p>\n
Last month, Southwest announced its\u00a0first mass layoff, cutting about 1,750 jobs roughly 15% of its corporate staff, many of them at its headquarters, a decision CEO Jordan called \u201cunprecedented\u201d in the carrier\u2019s more than 53 years of flying.<\/p>\n
\u201cWe are at a pivotal moment as we transform Southwest Airlines into a leaner, faster, and more agile organization,\u201d he said last month.<\/p>\n
Earlier this year, Southwest announced the retirement of its longtime finance chief,\u00a0Tammy Romo, who was replaced by Breeze executive Tom Doxey, and its chief administrative officer, Linda Rutherford. Both executives worked at Southwest for more than 30 years.<\/p>\n
Southwest has also cut\u00a0unprofitable routes, summer internships and employee teambuilding events its held for decades.<\/p>\n<\/p>\n
It\u2019s happening:\u00a0Southwest Airlines\u00a0will start charging passengers to check bags for the first time. It\u2019s a stunning reversal that shows the low-cost pioneer is willing to part with a customer perk executives have said\u00a0set it apart\u00a0from rivals in more than half a century of flying in hopes of\u00a0increasing revenue. Southwest\u2019s changes come after months of pressure […]<\/p>\n","protected":false},"author":0,"featured_media":15802,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-15801","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/15801","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=15801"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/15801\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/15802"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=15801"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=15801"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=15801"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}