Are you a frequent Southwest Airlines flyer? If so, you may want to buckle up because the company has announced some major changes.
On Tuesday, Southwest Airlines announced some major changes to its bag policy, which was the same policy that had drawn a lot of customers to the airline -- “bags fly free.”
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But starting May 28, just in time for summer travels, only Southwest’s Rapid Rewards A-List Preferred Members and Customers traveling on Business Select fares will keep the two FREE checked bag policy.
A-List Members and Rapid Rewards Credit Cardmembers will be allowed one free checked bag, and the customers who do not qualify for either option will be charged for their first and second checked bags.
“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,” said Bob Jordan, President, Chief Executive Officer, & Vice Chairman of the Board of Directors at Southwest Airlines. “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.”
The airline will also add a heavily discounted basic economy fare class that guarantees customers a seat. This class will likely have restrictions similar to those of other carriers’ basic economy offerings.
Less than a year ago, the Dallas-based airline announced it was doing away with another tradition, the open-boarding system it has used for more than 50 years.
Southwest has recently struggled and is under pressure from activist investors to boost profits and revenue. In October, the airline reached a truce with hedge fund Elliott Investment Management to avoid a proxy fight, but Elliott won several seats on the Southwest board.
The airline announced last month that it was eliminating 1,750 jobs, or 15% of its corporate workforce, in the first major layoffs in the company’s 53-year history.
The job cuts, which were scheduled to be mostly completed by the end of June, are part of a plan to slash costs and transform the company into a “leaner, faster, and more agile organization,” Jordan said at the time.
Southwest’s stock rose more than 6% before the market opened on Tuesday.
As recently as Southwest’s investor day in late September, airline executives described the bags-fly-free as the most important feature in setting Southwest apart from rivals. All other leading U.S. airlines charge for checked luggage, and Wall Street has long argued that Southwest was leaving money behind.
The airline estimated in September that charging bag fees would bring in about $1.5 billion a year but cost the airline $1.8 billion in lost business from customers who chose to fly Southwest because of its generous baggage allowance.
In a regulatory filing, Southwest disclosed that it now anticipates that first-quarter revenue per available seat mile will be up 2% to 4%. Its prior forecast was for an increase of 5% to 7%. The airline said it expects capacity to be down about 2%.
The airline announced last year that along with giving passengers assigned seats, it would charge them extra for more legroom and offer red-eye flights.
The Associated Press contributed to the report.