Traveling on low-cost carrier Southwest Airlines (NYSE: LUV) is about to get more expensive. The airline announced today that it will begin charging most customers for checked baggage, ending its longstanding policy of offering free checked bags.
The changes take effect for flights booked on or after May 28, 2025.
Southwest will continue to offer two free checked bags to Rapid Rewards A-List Preferred Members and customers traveling on Business Select fares. A-List Members and Rapid Rewards Credit Cardmembers will receive one free checked bag.
Cost-Cutting Measures Continue
This decision follows other cost-cutting moves, including laying off 15% of its corporate workforce last month — the first major layoffs in the airline’s five-decade history.
Southwest also announced last year that it would end open seating, one of its signature policies.
Activist Hedge Fund Pushes for Change
Southwest has resisted changes that could alienate its most loyal customers. But its leadership faces intense pressure from Paul Singer’s Elliott Investment Management, the activist hedge fund that acquired a $1.9 billion stake in the airline in June 2024.
Elliott-backed directors now hold five of 15 board seats, giving the fund significant influence over the company’s strategy.
Elliott has pushed to oust CEO Bob Jordan, arguing that Southwest has suffered from “poor execution and [its] leadership’s stubborn unwillingness to evolve.”
Singer’s Elliott Investment Management has been criticized as a “vulture fund” that is anti-worker and harmful to struggling, indebted countries.
In 2019, the Communications Workers of America described Singer’s $3.2 billion activist campaign against AT&T as focused on “cutting costs, laying off workers, divesting assets, and extracting cash for shareholders.”
Market Reaction and Revenue Forecast
News of the baggage fee policy sent Southwest’s stock soaring over 9% in morning trading.
However, the airline also cut its first-quarter revenue forecast to 2–4%, down from a previous estimate of 5–7%. The company attributed this revision to weaker discretionary spending by consumers, citing the potential impact of Trump-era tariffs and reduced government spending on travel.
It also remains to be seen whether the hedge fund-driven changes will alienate Southwest’s most loyal customers and erode the unique brand identity that sets it apart from competitors.
Globely News covers the game changers transforming the worlds of business, sports, politics, and technology. From AI and electric vehicles to the rise of China and the NFL's next stars, we've got you covered.