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Southwest Airlines customers face losing their biggest perk
More bad news for customers of Southwest Airlines - the 'bags fly free' perk faces the ax.
It is the only US airline not to charge, and it is customer friendly policies like this and open seating have been its trademark.
Only last month it ramped up a fees for those customers who want to board early in a bid to grab a better seat - the first sign it was changing tact.
Now further changes are being demanded by an activist investor. Elliott Investment Management announced on Sunday it had bought a $1.9 billion stake - 11 per cent of the airline - and is seeking to force out the CEO. It has backing from other investors.
The most notable is ditching the hugely popular policy of giving passengers two checked bags for free. All other US airlines charge, and last year it brought in billions of dollars of revenue for the likes of Delta, American, United, Spirit and Frontier.
Fees of $30 to $50 a bag would be welcome income for the financially struggling airline, analysts say. That could mean an extra $100 per flight for two bags.
Southwest Airlines offers two free bags, but that is set to change
Elliot sees the freebie as a missed opportunity to charge for bags and pull in tens of millions in fees.
Free bags is part of Southwest's DNA, and has regularly featured in its adverts. Changing it could alienate its regular flyers.
Elliot also wants to end the open seating policy and instead sell seats costing different amounts, such as basic economy and more premium options, instead.
Shares in the airline rose 7 percent on Monday, their second-best day since 2020, as Wall Street cheered the intervention, which was announced on Sunday.
In a letter to Southwest's board, the investment firm complained that Southwest's stock price has dropped more than 50 percent in the last three years.
Southwest CEO Robert Jordan 'has delivered unacceptable financial and operational performance quarter after quarter,' the letter read.
They are calling for Jordan to go.
But heJordan said Wednesday he will not resign and said Southwest will present its plan in September at an investor day.
Jordan said Southwest is investing in better technology - critics blamed outdated systems for contributing to massive flight cancellations in December 2022.
He said the airline is also improving the customer experience with better WiFi, larger bins for carry-on bags, and more power outlets.
Elliott, whose stake in Southwest is estimated by analysts to be around 11%, declined to comment on the CEO's remarks.
For years, Southwest appealed to cost-conscious flyers by not charging fees for a checked bag or changing a reservation.
All major airlines in the US,including Delta, charge for baggage - apart from Southwest
Fees for baggage from the biggest gloabal airlines is on the rise
Its planes don't have a premium cabin. Its closest rivals dropped change fees during the pandemic, however, and they are winning over upscale travelers with better seats and amenities.
In April, when Southwest reported a $231 million first-quarter loss, Jordan seemed to bend to those market pressures by announcing that Southwest was considering changes to its boarding and seating policies.
The airline even took the rare step of dropping four cities from its map.
A report out earlier this year showed how airlines including Delta, United and American pocketed a staggering $33.3 billion from just baggage fees last year - a sharp 15 percent rise from $29 billion in 2022.
This sum is solely made up of fees from larger carry-on bags, standard checked baggage fees, and fines for overweight or extra large checked bags and accounted for 4.1 percent of global airline revenue last year.