Southwest Airlines’ elimination of its “baggage flies free” benefit has taken another step forward and dealt a new blow to its customers.
It is the only airline in the US that does not charge, and passenger-friendly policies like this one and open seating have been its hallmark.
In July, Southwest announced it would abandon its open-seating policy after half a century. Instead, it will soon assign seats and charge passengers a fee to choose them in advance.
News broke this morning that an activist investor who wants to end the two-free checked bags policy has reached a key ownership threshold that gives him the power to make changes at the Dallas-based airline.
Bruce Sheridan wrote on X: “What a joy. Just look. Here come the baggage fees and fare increases. Bye @SouthwestAir.”
Southwest Airlines is offering two free bags, but that’s about to change
And Jason Inquires tweeted: ‘If Southwest Airlines goes ahead with their plan to eliminate open seating and then gets rid of their free bag policy… why would you fly Southwest?
Elliott Investment Management now owns 10 percent of Southwest’s common stock, Reuters reported on Tuesday morning.
Reaching that threshold means Elliott — which charges for the stocks as an opportunity to rake in tens of millions in fees — can call a special meeting.
Every other U.S. airline charges fees, and last year those fees generated billions of dollars in revenue for airlines including Delta, American, United, Spirit and Frontier.
Southwest’s $30 to $50 per bag fee would be welcome revenue for the financially struggling airline, analysts say. That could mean an extra $100 per flight for two bags.
Free baggage is part of Southwest’s DNA and is regularly featured in its ads. Changing it could alienate its regular passengers.
Elliott described what he sees as problems at Southwest in A letter to the Southwest Board of Directors in JuneHe pointed out Southwest’s stock price had fallen more than 50 percent in the past three years due to poor management.
The hedge fund, one of the world’s most powerful activist investors with $70 billion in assets under management, has demanded that CEO Robert Jordan and Executive Chairman Gary Kelly be ousted.
Jordan, Southwest’s chief executive since 2022, has said he will not resign and has signaled to staff that he and other executives are ready to fight Elliott.
Elliott has signaled to other shareholders that it is ready to take the next steps, including calling a special meeting.
Special meetings, used to solicit shareholder votes on matters that cannot wait until the next annual meeting, are rare.
And if Elliott were to call one, it would represent a significant escalation of his fight with the airline since his interest in the stock became public in June.
For years, Southwest appealed to cost-conscious travelers by not charging fees for a checked bag or changing a reservation.
Southwest Airlines CEO Bob Jordan is under fire from activist investors who want to eliminate free bags
All major US airlines, including Delta, charge for bags, except Southwest
Baggage fees on the world’s largest airlines are on the rise
Their planes do not have a premium cabin.
Its closest rivals eliminated change fees during the pandemic, meaning Southwest no longer stands out for that perk.
And rivals like Delta and American are wooing luxury travelers with better seats and amenities.
A report released earlier this year showed how airlines including Delta, United and American pocketed a staggering $33.3 billion in baggage fees alone last year, a sharp 15 percent increase from $29 billion in 2022.
This sum is made up solely of fees for larger carry-on bags, fees for standard checked bags and fines for overweight or oversized checked bags and accounted for 4.1 percent of global airline revenues last year.
