Starting today, bags *don’t* fly free. Southwest Airlines’ new bag policy has now gone into effect, following the March announcement that left many of its frequent flyers in shock. This also marks a milestone in Southwest’s efforts to drastically change its business model.
The bag fees will be $35 for the first checked bag and $45 for the second checked bag, as released in an internal memo yesterday.
The following passengers will be allowed one free checked bag:
- Southwest Rapid Rewards A-List members
- Southwest cobranded credit card holders
The following passengers will be allowed two free checked bags:
- Southwest Rapid Rewards A-List Preferred members
- Business Select passengers
This is almost identical to what we see on other airlines today. The $35/$45 fee is the same on American (when paying online), and the benefit for credit card holders and status members are also seen on other airlines.
Let’s revisit a segment from the airline’s investor day back in September, where they clearly stated that charging for bags would generate a loss for them. They estimated that they would generate about $1.5 billion in revenue from bag fees, but also estimated that they would lose $1.8 billion in lost bookings from those bag fees. They were proud to discuss their “customer first” product.
Following pressure from activist investors though, the math is now different.
Now, I don’t think the checked bag fees are the sole reason why people fly Southwest. Routes and airport hubs are just as important, and I don’t think many will opt to fly another airline just because they have to pay an additional $35.
That said, it’s not a good look from a customer point of view. As Southwest noted in the investor day presentation, they might “no longer be perceived as ‘customer first,'” and it ultimately puts its customers’ purchase habits and brand value at stake.
At this point, the only reason to fly Southwest is for convenience. In addition to the bag fees, the implementation of assigned seating, extra legroom seats, and changes to its loyalty program puts them in the same category as most other airlines, just without the premium stuff (lounges, etc). Note that domestic leisure demand has also seen a lot of softness this year, and that’s an area where much of Southwest’s market sits. We’ll see how this plays out, but these changes don’t add up for me.
Featured image by Southwest Airlines.
