Kaltbaum Capital Management President Gary Kaltbaum analyzes Nvidia and Southwest Airlines on ‘Varney & Co.’
Southwest Airlines is ending its long-standing policy of free checked bags and introducing a new basic fare on Wednesday as the carrier aims to attract new customers and boost profitability.
Most passengers will be charged $35 for their first checked bag and $45 for their second checked bag for flights booked and or changed on or after Wednesday, marking a major shift in its customer-friendly pricing model.
Still, Southwest, considered a “no-frills” carrier, said Rapid Rewards A-List Preferred members and customers traveling on Business Select or Choice Extra fares will receive two free checked bags for up to eight additional passengers traveling on the same reservation. Additionally, A-List Members and Rapid Rewards Credit Cardmembers will get one free checked bag as the carrier aims to encourage more people to join its loyalty program.
The carrier is simultaneously launching a new basic fare, which will be its cheapest but least flexible fare.
SOUTHWEST ENDING ITS OPEN SEATING POLICY
Travelers use a Southwest Airlines Co. self-check-in kiosk at Logan International Airport in Boston on Friday, July 19, 2019. ( Scott Eisen/Bloomberg via Getty Images / Getty Images)
CEO Bob Jordan said the changes, announced in March, are part of an effort “to meet current and future customer needs” as well as “attract new customer segments we don’t compete for today.”
However, unlike rival carriers, Southwest upheld a policy allowing passengers to check free bags, appealing to a wide range of budget-conscious travelers. The policy, along with open seating, helped the carrier distinguish itself as one of the first to adopt and maintain its low-cost model. However, in recent years, financial challenges have forced the airline to reevaluate its approach.
SOUTHWEST AIRLINES EXITS MULTIPLE AIRPORTS AS BOEING TROUBLES WEIGH
Southwest Airlines Boeing 737-700 aircraft as seen landing at dusk at Ronald Reagan Washington National Airport. (Getty Images / Getty Images)
To drive more revenue growth, Southwest announced in July that it would begin offering assigned seating and offering premium seating options on all flights – a move designed to boost profits by charging higher rates for premium seats across its entire network. The carrier has maintained a single economy-class cabin with open seating assignments for more than 50 years.
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Reservations for flights with assigned seats are expected to start in the second half of 2025 for flights operating in 2026.
Later this year, the company will change the fare classes as well. In the third quarter of 2025, customers will choose between Choice Extra, which was formerly Business Select, Choice Preferred, formerly Anytime, and Choice, formerly Wanna Get Away Plus. The new fares will also have new seat options: Standard, Preferred and Extra Legroom, which will cost extra.
Southwest is working to gain more customers and increase revenue while navigating a complex landscape. The carrier withdrew its financial forecast last month because of economic uncertainty stemming from tariffs. It didn’t reaffirm its previous forecast of $1.7 billion in earnings before interest and taxes in 2025 and its outlook of about $3.8 billion in 2026.
Reuters contributed to this report.
