In this articleLUVFollow your favorite stocksCREATE FREE ACCOUNTBaggage handlers load luggage onto a Southwest Airlines Boeing 737 at Austin-Bergstrom International Airport on August 24, 2024 in Austin, Texas. Kevin Carter | Getty Images News | Getty ImagesIt’s happening: Southwest Airlines will start charging passengers to check bags for the first time.It’s a stunning reversal that shows the low-cost pioneer is willing to part with a customer perk executives have said set it apart from rivals in more than half a century of flying in hopes of increasing revenue.Southwest’s changes come after months of pressure from activist Elliott Investment Management. The firm took a stake in the airline last year and won five board seats as it pushed for quick changes at the company, which held on for decades — until now — to perks like free checked bags, changeable tickets and open seating.For tickets purchased on or after May 28, Southwest customers in all but the top-tier fare class will have to pay to check bags, though there will be exceptions. Elite frequent flyers who hold “A-List Preferred” status will still get two bags and A-List level members will get one free checked bag. Southwest credit card holders will also get one free checked bag.”Two bags fly free” is a registered trademark on Southwest’s website. But its decision to about-face on what executives long cast as a sacrosanct passenger perk brings the largest U.S. domestic carrier in line with its rivals, which together generated $5.5 billion from bag fees last year, according to federal data.Read more CNBC airline newsSouthwest Airlines will charge to check bags for the first time, launch basic economy ticketsFirst-class seats are getting so fancy they’re holding up new airplanesTrump is ‘not happy’ with Boeing over Air Force One delays, but airlines are growing upbeatGovernment travel has ‘fallen off’ since Trump inauguration, United Airlines saysSouthwest executives have long said they didn’t plan to charge for bags, telling Wall Street analysts that it was a major reason why customers chose the airline.”After fare and schedule, bags fly free is cited as the No. 1 issue in terms of why customers choose Southwest,” CEO Bob Jordan said on an earnings call last July.But Southwest has changed its tune.”What’s changed is that we’ve come to realize that we need more revenue to cover our costs,” COO Andrew Watterson said in an interview with CNBC about the baggage fee changes. “We think that these changes that we’re announcing today will lead to less of that share shift than would have been the case otherwise.”In September, Southwest’s then chief transformation officer, Ryan Green, told analysts that its analysis showed Southwest would lose more money from passengers defecting to rivals if it started charging for bags than it would make from the fees.”The fact that free bags is a key driver of choice creates the risk that customers may choose the competition if we change the policy,” he said.Southwest said last month that it had parted ways with Green.Pristine Floyde searches for a friend’s suitcase in a baggage holding area for Southwest Airlines at Denver International Airport on December 28, 2022 in Denver, Colorado.Michael Ciaglo | Getty ImagesOther changesThe airline also said Tuesday that it will launch a new, basic economy fare, something rivals have offered for years.Southwest, in addition, will change the way customers earn Rapid Rewards: Customers will earn more of the frequent flyer miles depending on how much they pay. Redemption rates will vary depending on flight demand, a dynamic pricing model competitors use.And flight credits for tickets purchased on or after May 28 will expire in one year, or earlier, depending on the type of fare purchased.It’s the latest in a string of massive stra …
