WOW: Southwest Will Start Charging For Checked Bags

It’s officially the end of an era for Southwest Airlines, as the Dallas-based carrier will finally do what it has insisted for so long that it wouldn’t even consider. This is only one of several changes, as the airline is also introducing basic economy fares, adding new restrictions on flight credits, and devaluing Rapid Rewards points.

Southwest cuts two free checked bags policy

Southwest has long been known for offering two free checked bags to all passengers, regardless of the fare they book. Arguably this has been the single biggest way that Southwest has differentiated itself from the competition, and the airline has heavily marketed its “Bags Fly Free” policy.

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For so long, Southwest executives have insisted that this is the one policy that they weren’t willing to change. They claimed to have crunched the numbers, and to have determined that the ticket revenue lost from charging for checked bags would exceed the ancillary revenue from charging for checked bags. I guess there has been a change of heart, because that will no longer be the case.

For tickets booked as of May 28, 2025, Southwest will change its checked bag policy:

• Southwest will continue to offer two free checked bags to Rapid Rewards A-List Preferred members, and customers traveling on Business Select fares
• Southwest will offer one free checked bag to Rapid Rewards A-List members, and those with a Rapid Rewards credit card will receive a credit for one free checked bag
• Customers who don’t qualify for these benefits will be charged for both a first and second checked bag

At least as of now, carry-on bags will continue to be complimentary for all passengers. This latest change follows Southwest recently greatly cutting points earning on its Wanna Get Away fares, which was almost a way of indirectly creating a basic economy product.

Here’s how Southwest CEO Bob Jordan describes this development (it’s clear that at this point he’ll say whatever he needs to in order to keep his job):

“We have tremendous opportunity to meet current and future Customer needs, attract new Customer segments we don’t compete for today, and return to the levels of profitability that both we and our Shareholders expect. We will do all this while remaining focused on what’s made us strong — our People and the authentic, friendly, and award-winning Customer Service only they can provide.”

Is this a smart move, or will it backfire horribly?

We know that Southwest has been under major pressure to improve profitability, given the activist investor the company has, in the form of Elliott Investment Management. Elliott has been able to get five board seats, and has pushed for… well, just about everything, to change.

Under pressure from Elliott, Southwest has done everything from announcing plans for assigned and extra legroom seating, to laying off employees for the first time in its history, and much more. Now, admittedly Southwest was probably a bit too stuck in its ways, and should’ve evolved earlier. That being said, is changing virtually everything about the company, and making it just like the competition, the right move?

If you align Southwest with the rest of the industry, you’re left with an airline that has a massive domestic route network, and great scale. However, the airline has high labor costs, still doesn’t have a real premium product, and doesn’t operate long haul flights, so that’s a major disadvantage compared to carriers like Delta and United. Furthermore, the carrier’s checked bag policy was one of the reasons the airline could schedule flights so efficiently, and operate quick turns.

The timing of this is interesting, given that Delta has just sounded the alarm on falling revenue and yields, claiming that economic uncertainty is impacting domestic demand, particularly in economy. So one would think this might not be the time for Southwest to completely change its business model.

Now that we’ve seen the extent of the changes, I think this also explains why Ryan Green, Southwest’s Chief Transformation Officer, recently resigned. He was the one who insisted that charging for checked bags would be bad for Southwest’s bottom line, and clearly he wasn’t okay signing off on that. Meanwhile Bob Jordan…

The gloves are finally off. Elliott has basically gotten its way, turning Southwest into the competition. Will this be a boom to Southwest’s bottom line, or the worst mistake the company ever made? I think this will be the ultimate test of whether an inclusive business model and customer friendly policies pay off, or if the race to the bottom is the only way to go…

Bottom line

For tickets booked as of May 28, 2025, Southwest will no longer offer free checked bags on all fares. Those on the most expensive fares and top tier elites will still get two free checked bags, lower tier elites and credit card holders will get one free checked bag, and others will get no free checked bags.

Southwest executives insisted for so long that the two free checked bag policy was there to stay, so this is a major change for the airline and for passengers. Just about all aspects of the Southwest passenger experience are changing, and we’ll see what it means for the company’s bottom line.

How do you see this playing out for Southwest?