What Southwest Airlines is changing, from bag fees to basic economy

It is a $300 million gamble. Final yr, Southwest mentioned its “rigorous analysis” discovered it will lose that a lot in market share if it began charging bag charges. The coverage has set Southwest other than its rivals for many years.

Eliminating its well-known “two luggage fly free” technique is a part of a large push on the provider to ditch its long-standing buyer perks and insurance policies. Southwest additionally introduced final yr that it is shifting from open seating to a single-class cabin with the intention to increase income. One other change introduced Tuesday: primary financial system tickets that do not enable free adjustments.

Here is what vacationers have to know in regards to the new insurance policies:

Vacationers who purchase any ticket besides Southwest’s top-level Enterprise Choose fare should pay charges to test luggage. Prospects who buy a Enterprise Choose ticket will have the ability to test two luggage without spending a dime.

High-tier A-Listing Most well-liked frequent flyer program members will even get two checked luggage without spending a dime. A-Listing stage members will have the ability to test one bag without spending a dime, as will these with a Southwest bank card.

Southwest did not disclose how a lot it would value to test a bag, however charges begin at $35 apiece on rivals Delta, United and American.

The brand new checked baggage charges go into impact for tickets bought on or after Might 28.

Carry-on bag insurance policies have not modified, even for primary financial system tickets.

All tickets will embody a free carry-on bag, even for the brand new primary financial system tickets.

Southwest advised staff on Tuesday, simply after the announcement, that prospects will “undoubtedly keep it up extra baggage than earlier than” so it is taking a number of steps to attempt to hold issues shifting.

Gate brokers will get cell bag-tag printers “decreasing the necessity for string bag tags” and the corporate will design new carry-on measurement guides so prospects can see if their baggage matches as a keep it up, in line with a employees memo from Justin Jones, EVP of operations, and Adam Decaire, senior vp of community planning, a duplicate of which was seen by CNBC.

The airline additionally plans to hurry up retrofits of its Boeing 737-800s and Max plane to incorporate bigger overhead bins.

Probably. In airport lobbies, Southwest mentioned it might redistribute employees to deal with altering buyer wants with the brand new bag guidelines. It should additionally equip employees there with cell printers.

“With a further step for Prospects to pay for luggage on the ticket counter or kiosks, we have now to plan for longer transaction and queue occasions, even when fewer Prospects are checking their luggage altogether,” the executives wrote.

Southwest has been below rising strain to lift income and enhance returns after activist hedge fund Elliott Funding Administration took a stake within the airline final yr and pushed for adjustments to the provider’s enterprise mannequin.

Southwest executives have lengthy advised Wall Road traders and prospects that its “two luggage fly free” coverage is sacrosanct, one thing that units it other than rivals.

At an investor day in September, the provider mentioned it will make as much as about $1.5 billion if it charged for luggage however lose $1.8 billion in market share from the coverage change.

Tons! Southwest goes to launch a primary financial system fare that isn’t refundable and would not enable for adjustments. It will not enable for same-day standby tickets.

Flight credit for these “primary” tickets, if unused, will expire in six months whereas credit for different flights will expire in 12 months. Beforehand, Southwest credit did not expire.

The provider final yr mentioned it plans to begin promoting tickets with assigned seats, ending its decades-old open-seating coverage. It should additionally quickly provide seats with further legroom, a bid to compete with extra full-service airways.

Southwest Airways CEO Bob Jordan mentioned Tuesday that the provider’s govt workforce thinks the coverage adjustments will drive sign-ups for its co-branded bank card.

He mentioned the brand new channels the airline is promoting tickets via, like Expedia, will assist the provider.

Southwest passengers will earn Fast Rewards frequent flyer miles based mostly on how a lot they pay for his or her ticket. Redemption charges will rely upon demand for the flight, the same mannequin to what different carriers have.