- Southwest Airlines is ending its free baggage policy, and its competitors smell opportunity.
- United and Delta’s CEOs talked about what the change means for them on Tuesday.
- Southwest’s move follows investor pressure and a broader business overhaul.
Southwest Airlines is getting rid of its hallmark free baggage policy, and competitors say it’s a good thing for them.
The CEOs of United Airlines and Delta Air Lines said on Tuesday that Southwest’s change could lead some price-sensitive customers to switch airlines.
United’s Scott Kirby said that the Texas-based carrier’s elimination of its free bags perk was like “slaying the sacred cow.”
“It will be a really big deal for Southwest,” Kirby said at the JPMorgan industrials conference. “It would be good for everyone else.”
Delta’s Ed Bastian made similar comments at the conference.
“Clearly, there are some customers who chose them because of that, and now those customers are up for grabs,” Bastian said.
Even Amtrak got in on the conversation, reminding customers in a Tuesday X post that train passengers can bring two carry-on bags for free.
Airlines compete closely for US domestic market share.
Delta had 17.7% of the share, Southwest had 17.3%, and United had 16% of the domestic market share for the year that ended in November 2024, according to the Bureau of Transportation Statistics.
Ancillary fees, which are extra charges for non-essential add-ons like seat selection, in-flight meals, and baggage, have become an increasingly important revenue source. United reported it made $4.5 billion in ancillary fees in 2024.
Southwest is under heavy investor pressure
On Tuesday, Southwest announced it was changing its “bags fly free” policy to only apply to select premium members from May 28. It said that customers who don’t qualify will pay for their first and second checked bags.
In July, Southwest’s CEO Bob Jordan said that after fare and schedule, checked bags were the “number one issue in terms of why customers choose Southwest” and he reiterated the stance on checked baggage again in September.
At Tuesday’s JPMorgan conference, he said the change would spur Southwest credit card enrollments and add revenue.
“We carry nearly two times the bags as compared to the competition, which is costly on many fronts,” Jordan said.
The move is part of Southwest’s larger business overhaul as the company faces investor pressure after a series of lackluster earnings. Passenger volumes are below pre-pandemic levels despite strong travel demand. Southwest’s stock is down 26% in the last five years, while United is up over 80%.
In July, Elliott Investment Management, which built up an 11% stake in the company, said the airline’s decades-old strategies weren’t working. The activist investor called for an overhaul of management and the board of directors. In October, Southwest added six directors from outside the company as part of a deal with Elliot.
In July, Southwest abandoned its other famous policy — free seating — and replaced it with basic economy fares and premium seats available for purchase. The company also laid off 15%, or about 1,750, of its corporate employees last month, breaking a decadeslong reputation of not having mass layoffs.
Southwest’s stock is down 9% so far this year.
Southwest did not respond to a request for comment sent outside regular business hours.
