Starting May 28, Southwest Airlines, one of the largest airlines in the United States, will begin charging for checked baggage, ending a decades-long policy of free allowances that set it apart in the industry. Known for letting passengers check two bags at no extra cost, the company announced the shift as part of an effort to boost revenue and improve profitability, which has faced challenges since the pandemic. Unveiled on March 11, the decision marks a turning point for the Dallas, Texas-based carrier and reflects pressure from investors for a business model more aligned with U.S. airline standards. Under the new policy, only the most loyal customers and those opting for the priciest fares will continue to enjoy free baggage perks, while most travelers will face fees yet to be detailed.
The change comes amid a broader transformation for Southwest. Beyond scrapping its “bags fly free” policy, the airline had already signaled the end of another hallmark of its identity: the open-seating system, in place since its founding in 1971 and set to be replaced with assigned seats starting in the second half of this year. This series of shifts reflects an attempt to adapt to market demands and shareholder expectations, spearheaded by Elliott Investment Management, a hedge fund that acquired a 10% stake in the company in 2024 and began influencing strategic decisions.
Southwest executives, including CEO Bob Jordan, framed the moves as a way to balance rewarding loyal customers with the need to attract new travelers and improve financial performance. The goal is to lift the airline’s operating margin from 2%, recorded last year, to at least 10% by 2027—a benchmark investors expected from the carrier before the global health crisis.
A 53-year tradition comes to an end
For over half a century, Southwest Airlines built its reputation by offering perks that distinguished it from industry giants like Delta, United, and American Airlines. The free baggage policy, in particular, was a key draw for passengers, allowing them to check up to two 50-pound bags each at no additional charge. This standout feature was so central that the airline trademarked the phrase “two bags fly free,” leveraging it in marketing campaigns to underscore its customer-first ethos.
The decision to ditch this practice didn’t come without internal pushback. During last September’s investor day, Southwest cautioned that ending the free baggage policy could cost $1.8 billion in lost market share, outpacing the $1.5 billion in annual revenue that baggage fees might generate. At the time, the airline argued that the no-fee policy was a top reason customers chose it, bolstering its brand as consumer-focused. However, weak profits and mounting pressure from Elliott Investment Management shifted the course of this strategy.
Now, the airline has opted for a hybrid approach: A-List Preferred members, the top tier of the Rapid Rewards loyalty program, and passengers buying the premium Business Select fare will still check two bags for free. A-List members, a lower tier, will get one free checked bag, as will holders of Southwest’s co-branded credit card. For everyone else, fees will apply to the first and second checked bags, though exact amounts remain undisclosed.
Investor pressure and revenue chase
Elliott Investment Management’s sway was pivotal in driving Southwest’s baggage policy overhaul. Holding five of the 15 board seats through its appointees, the fund had criticized the airline’s leadership for sticking to practices that, in its view, capped revenue potential. Charging for checked bags is a direct response to this critique, bringing Southwest in line with a norm its rivals have long embraced—raking in over $7 billion in baggage fee revenue across major U.S. airlines in 2023, per the Bureau of Transportation Statistics.
In contrast, Southwest earned just $73.4 million from baggage-related fees in the same period, a figure tied to charges for oversized or overweight bags (above 50 pounds or 62 linear inches) and additional luggage beyond the two free ones. Compared to American Airlines’ $1.4 billion or United’s $1.2 billion, this sum highlights how much Southwest left on the table by maintaining its no-fee stance. The new policy aims to reverse that trend, targeting an annual revenue boost of up to $1.5 billion, based on internal estimates shared last year.
Beyond financials, the shift mirrors broader industry trends. In recent years, major U.S. carriers have leaned into premium services and international routes to woo higher-spending travelers—a segment where Southwest, focused on domestic flights and affordable fares, hasn’t traditionally competed. With baggage fees and premium seating, the airline signals an intent to diversify its customer base and strengthen its market foothold.
What changes for passengers starting in May
Come May 28, Southwest passengers will need to adjust their travel expectations and planning. Those without loyalty status or unwilling to spring for higher fares will face new costs to check bags, a first in the airline’s history. Fees will apply to both the first and second checked bags, with weight and size limits unchanged: 50 pounds (23 kilograms) and 62 linear inches (157 centimeters), including wheels and handles.
For loyal customers, benefits remain as a reward. Here’s the breakdown of the new structure:
- A-List Preferred and Business Select: Two free checked bags, preserving the full perk of the old policy.
- A-List and Southwest credit card holders: One free checked bag, with the second subject to a fee.
- Other passengers: Fees for both the first and second checked bags, with specifics to be announced.
Oversized or overweight bags will still incur extra charges: $100 for luggage between 51 and 70 pounds (23 to 32 kilograms) and $125 for those between 71 and 100 pounds (32 to 45 kilograms). Oversized items, from 63 to 80 inches (160 to 203 centimeters), will also cost $125 each.
Timeline of Southwest’s changes
Southwest’s shift to its new business model is rolling out in phases. The baggage policy change is just one of several transformations announced in recent months. Here’s the timeline of key updates:
- July 2024: Announcement of the end of open seating and introduction of assigned seats.
- September 2024: Start of sales for flights with premium seats offering up to five extra inches of legroom, covering about a third of the fleet’s capacity.
- February 2025: Launch of ticket sales for flights with the new seating system on the airline’s website.
- May 28, 2025: Baggage fee policy takes effect.
- First half of 2026: Full rollout of flights with assigned seating expected.
These changes will require a major overhaul of Southwest’s Boeing 737 fleet, with interior adjustments slated to begin early this year. The airline also plans to cut turnaround times between flights and add overnight “red-eye” flights to maximize aircraft use.
Market impact and early reactions
Southwest’s move to charge for checked bags is already stirring the airline industry. Executives from rival carriers, like Delta CEO Ed Bastian, suggested the change could benefit competitors, as some travelers picked Southwest precisely for its free baggage policy. The expectation is a potential reshuffling of passengers, particularly among cost-sensitive flyers who may now have less reason to choose the airline.
Passenger reactions are mixed. Frequent flyers with Rapid Rewards status, such as A-List Preferred members, tend to welcome the shift, as their perks remain intact. Casual travelers, however, voiced frustration on social media, arguing Southwest is losing its unique identity. Industry analyst Brett Snyder of Cranky Flier went as far as calling the announcement day “the day Southwest died,” underscoring its symbolic weight.
On March 11, Southwest’s stock (LUV) surged over 9% in pre-market trading, signaling investor approval of the news. The uptick reflects confidence that the changes, including baggage fees, could help the airline regain its pre-pandemic profitability.
Southwest’s new horizon
Looking ahead, Southwest Airlines is repositioning itself as a carrier more in step with U.S. industry norms. Beyond baggage fees and assigned seats, the airline unveiled a “basic economy” fare starting in May, offering lower prices but with restrictions like flight credits expiring in six months—unlike the one-year window for other fares. The move aims to draw price-sensitive travelers who often opt for ultra-low-cost carriers like Spirit and Frontier.
Distribution expansion is also on the table. Recently, Southwest began selling tickets via Expedia, breaking from its tradition of exclusive sales through its own site. International partnerships, such as with Icelandair, will broaden route options to Europe this year, starting with connections via Baltimore-Washington International Marshall Airport.
With these shifts, Southwest aims to balance retaining its loyal base while capturing new market segments. Its fleet of over 800 Boeing 737s will be gradually retrofitted to support the updates, with 50 to 100 planes revamped monthly starting early this year. The promise is a leaner operation, with on-time performance already touted as the industry’s best in 2025, hitting a 98.3% flight completion rate.
