Southwest Airlines is set to reverse its long-standing “two bags fly free” policy

Southwest Airlines is set to reverse its long-standing “two bags fly free” policy by charging customers for checked luggage starting in May. The move, which exempts travelers holding a Southwest credit card, those with elite frequent flyer status, or passengers purchasing premium ticket classes, marks a significant departure from the airline’s decades-old approach. In addition to implementing bag fees, Southwest will introduce assigned seating, a no-frills basic economy fare, and a policy in which flight credits will now have expiration dates.

Fitch Ratings, however, has raised concerns over these strategic changes. The ratings agency issued a negative outlook for Southwest, warning that the new policies could weaken the carrier’s competitive position relative to its network rivals. According to Fitch, initiatives aimed at boosting profitability—such as charging for checked bags and expiring flight credits—might erode Southwest’s traditional strengths, including its reputation for low costs and strong balance sheet management. The agency also noted that these moves could signal a shift toward a less conservative capital allocation strategy, which might have broader implications for the airline’s financial stability.

The policy changes have already stirred a reaction on social media, where some customers have expressed their dissatisfaction with the new fees and service modifications. Despite the vocal criticism online, Fitch stated that any potential loss in market share remains uncertain. The broader impact on Southwest’s competitive position is yet to be seen, as the airline faces mounting pressure to improve margins. This pressure has been intensified since activist hedge fund Elliott Investment Management acquired a stake in the carrier and secured five board seats following a settlement last year.

While Southwest declined to comment on Fitch’s negative outlook, the airline’s decision reflects its efforts to enhance profitability amid a challenging competitive landscape. As the industry continues to evolve, Southwest’s departure from its long-held policies could serve as a bellwether for how legacy low-cost carriers adapt to shifting market dynamics. The coming months will be critical in determining whether these changes can help balance improved financial performance with the preservation of the customer-centric advantages that have long distinguished the airline in a highly competitive sector.

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Sources: AirGuide Business airguide.info, bing.com, cnbc.com