Southwest Airlines said Tuesday it will be charging the check bag for the first time in a flight that has been in more than half a century. Careers are increasing pressure from Elliott investment management, and are seeking dramatic changes in the company’s business model. US airlines won over $5 billion in baggage fees last year.
It’s happening: Southwest Airlines begin billing passengers to check their luggage for the first time.
When low-cost pioneers say they are differentiating their flight rivals for over half a century in hopes of increased revenue, it’s a spectacular reversal that shows that low-cost pioneers are willing to let go of their clients’ perks.
The Southwest change comes after months of pressure from activist Elliott Investment Management. The company took stock in the airline last year, earning five board sheets, and wanted a quick change in the company.
For tickets purchased after May 28th, Southwest customers will have to pay to check their bags by all customers except for the class that can be top tier. Elite Frequent Flyers with “A-List Priority” status get two bags, and A-List Level members get one free check bag. Southwest credit card holders will also get one free check bag.
“Two Bags Fly Free” is a registered trademark of the Southwest website. However, federal data shows that executives cast as Saxant passengers are cast as Saxant passengers are making the decision to face what the US’s biggest domestic airlines have produced from $5.5 billion in bag fees along its rivals.
Southwest executives have long told Wall Street analysts they didn’t plan to bill their bags, telling them that they were the main reason their customers chose the airline.
“After fares and schedules, Bagfly Free will be cited as the number one issue in terms of why customers choose Southwest,” CEO Bob Jordan said in a revenue call last July.
But Southwest changed the song.
“What changed is realizing that we need more revenue to cover the cost,” COO Andrew Watterson said in an interview with CNBC about the changes in baggage fees. “We believe these changes that we were making today will have less share shifts than they would otherwise.”
In September, Southwest’s then-Chief Transformation Director Ryan Green told analysts that the analysis showed Southwest had died to a rival if Southwest began charging from fees.
“The fact that free bags are key drivers for choice creates the risk that changing policies will allow customers to choose to compete,” he said.
Michael Ciagro | Getty Images
Pristine Floyde will search for a friend’s suitcase in the baggage retention area of Southwest Airlines at Denver International Airport on December 28, 2022 in Denver, Colorado.
Southwest said he broke up with Green last month.
The airline also said Tuesday that it will launch a new basic economic fare that its rivals have been offering for years.
Additionally, Southwest changes the way customers get quick rewards. Customers earn more free carmiles depending on the amount they pay. The redemption rate depends on flight demand and the use of competitors in the dynamic pricing model.
Additionally, flight credits for tickets purchased after May 28th will expire one year or earlier, depending on the fare you purchase.
It’s the latest in a series of major strategic changes in Southwest as performance lags behind its rivals.
Last July, Southwest shocked passengers when it announced it was dumping its open seat model for its assigned seating, adding a “premium” extra legroom option, and ending a decades-old single-class cabin.
Airlines are also trying to cut costs. The increased costs coming out of the pandemic are removing a sip from the airline’s margins.
Last month, Southwest announced its first major layoff, cutting employment of around 1,750 people in its corporate staff. Most of them are head offices, Jordan, the decided CEO who has been called “unprecedented” after more than 53 years of flight.
“We are in a pivotal moment as we transform Southwest Airlines into a more lean, faster, more agile organization,” he said last month.
Earlier this year, Southwest announced the retirement of longtime finance chief Tammy Romo. Tammy Romo was replaced by Breeze executive Tom Doxey and his supreme administrative officer Linda Rutherford. Both executives worked at Southwest for over 30 years.
Southwest has also cut back on unprofitable routes, summer internships and employee team building events that have been held for decades.
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