Southwest Airlines customers face the loss of their biggest benefit

More bad news for Southwest Airlines customers — the ‘bags fly free’ benefit faces the axe.

It’s the only US airline that doesn’t charge a fee, and customer-friendly policies like this and open seats have been its trademark.

Just last month it raised a fee for those customers who want to board early in a bid to snag a better seat – the first sign it was changing tack.

Now further changes are being sought by an activist investor. Elliott Investment Management announced Sunday that it had bought a $1.9 billion stake — 11 percent of the airline — and is looking to force the CEO out. It has support from other investors.

The most notable is the scrapping of the hugely popular policy of giving passengers two checked bags for free. All other US airlines charge, and last year it brought in billions of dollars in revenue for companies like Delta, American, United, Spirit and Frontier.

Fees of $30 to $50 per bag would be welcome revenue for the struggling airline, analysts say. This can mean an extra $100 per flight for two bags.

Southwest Airlines offers two free bags, but that will change

Southwest Airlines offers two free bags, but that will change

Elliot sees the payment as a missed opportunity to pay the purse strings and pull back tens of millions in fees.

The free bag is part of Southwest’s DNA and has appeared regularly in its advertising. Changing it can alienate its regular flyers.

Elliot also wants to end the open seat policy and instead sell seats that cost different amounts, such as basic economy and more premium options.

Shares in the airline rose 7 percent on Monday, their second best day since 2020, as Wall Street cheered the intervention, which was announced on Sunday.

In a letter to Southwest’s board, the investment firm complained that Southwest’s stock price has fallen more than 50 percent in the past three years.

Southwest CEO Robert Jordan “has delivered unacceptable financial and operational performance quarter after quarter,” the letter said.

They are calling for Jordan to go.

But he Jordan said Wednesday he will not resign and said Southwest will present its plan in September at an investor day.

Jordan said Southwest is investing in better technology — critics blamed outdated systems for contributing to mass flight cancellations in December 2022.

He said the airline is also improving the customer experience with better WiFi, bigger bins for carry-on bags and more power outlets.

Elliott, whose stake in Southwest is estimated by analysts to be about 11%, declined to comment on the CEO’s remarks.

For years, Southwest appealed to cost flyers, not charging fees for a checked bag or changing a reservation.

All major US airlines, including Delta, charge for baggage - except Southwest

All major US airlines, including Delta, charge for baggage – except Southwest

Baggage fees from the world's largest airlines are on the rise

Baggage fees from the world’s largest airlines are on the rise

Its planes do not have a premium cabin. However, its closest rivals dropped change fees during the pandemic and are winning over luxury travelers with better seats and amenities.

In April, when Southwest reported a first-quarter loss of $231 million, Jordan appeared to bow to those market pressures by announcing that Southwest was considering changes to its boarding and boarding policies.

The airline even took the rare step of removing four cities from its map.

A report released earlier this year showed how airlines including Delta, United and American earned $33.3 billion from baggage fees alone last year — a sharp 15 percent increase from $29 billion in 2022.

This amount consists only of fees from larger carry-on bags, standard checked baggage fees and penalties for overweight or oversized checked bags and accounted for 4.1 percent of global airline revenue last year.

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