Southwest Airlines is known for being one of the few major U.S. airlines that offers free checked bags. But now, there’s talk about that policy possibly changing—and it could cost the airline a lot of money.
A new report from TD Cowen, a financial services firm, suggests that if Southwest ends its free checked bag policy, it may end up losing more money than it makes.
The report says the airline could earn an extra $1.3 billion a year from charging for bags, but that might not be enough to cover the losses from passengers who may stop flying with them.
Analysts believe that many travelers choose Southwest because of the free bags. If the airline starts charging for them like most other airlines do, some customers might switch to cheaper options or airlines that offer better deals. That could lead to fewer ticket sales and ,ultimately, lower profits.
Southwest has not officially announced any changes to its free bag policy, but the company is under pressure.
Their stock price has dropped recently, and they are looking for ways to boost revenue. The airline is trying to stay competitive in a tough market where fuel prices are rising and many passengers are looking for budget-friendly options.
The report also says Southwest may need to update its operations to remain profitable. This could include changing its flight schedules, improving technology, and making adjustments to ticket pricing. All of this comes at a time when the airline industry is still recovering from pandemic-related losses.
For years, Southwest has promoted itself as a low-cost airline that doesn’t charge extra for bags. This has helped it build a loyal customer base. But now, with rising costs and growing competition, the company may be rethinking its strategy.
Still, the move to drop free bags could be risky. The report says that if Southwest loses even a small percentage of its customers, the financial hit could be greater than the income earned from bag fees. T
his is because those customers often buy tickets, snacks, and other services that bring in more money than a single bag fee would.
So far, Southwest has not confirmed if it will make this change. A spokesperson for the airline said they continue to evaluate ways to improve performance but didn’t mention anything specific about baggage fees.
If Southwest does decide to charge for checked bags, it would mark a big shift in the airline’s business model—and could change how customers feel about flying with them.