Southwest Airlines, known for its industry-leading policy of two free checked bags, is now exploring the possibility of charging fees for checked luggage. The airline recently conducted a survey to gauge customer sentiment regarding this potential policy change. The survey asked customers about various scenarios, including one where the cheapest fare only includes a carry-on, while the next-lowest fare includes a checked bag. By gathering this information, Southwest aims to better understand what its customers value most and how they would react to such a change.
Southwest Airlines confirmed conducting the survey as part of its due diligence process. The airline emphasized that there are currently no plans to implement bag fees, but it is important for them to stay informed about customer preferences. Southwest acknowledges the importance of remaining competitive in the industry and staying current on customer preferences. This commitment to understanding stakeholder sentiment extends beyond baggage policies and includes questions about travel habits, booking preferences, and loyalty benefits.
In an effort to boost profit margins, Southwest Airlines announced plans to introduce assigned seating and extra-legroom seats. These initiatives are intended to generate additional revenue beyond the traditional fare and schedule offerings. However, CEO Bob Jordan reiterated during the Q2 earnings call that checked bags will continue to be included in the fare. According to Jordan, the “bags fly free” policy is a key factor influencing customers to choose Southwest over other airlines.
Despite Southwest’s commitment to its existing business model, the airline is facing pressure from activist investor Elliott Investment Management. The investment firm, which holds an 11% stake in Southwest, has proposed changes to the airline’s board of directors and leadership team. Elliott argues that Southwest has been too slow to adapt and innovate in response to changing market conditions. While Southwest remains focused on customer preferences and industry competitiveness, it must also navigate the demands of shareholders seeking significant changes.
Southwest Airlines is cautiously considering the implementation of bag fees based on customer sentiment and industry trends. While the airline remains committed to its current policy of two free checked bags, external pressures from activist investors could influence future decisions. By balancing customer preferences, revenue generation strategies, and shareholder demands, Southwest aims to position itself for continued success in a highly competitive industry.