For over 60 years, Southwest Airlines has been defined by its people-first policies: no assigned seating, two free checked bags, and a laid-back flying experience that made it a favorite for millions.
They weren’t just perks, they were the airline's DNA, and for many travelers, the biggest selling point.
But now, as Southwest faces a whirlwind of operational challenges and investor pressure, those iconic features may be on the chopping block.
What changed? Does this signal the end of the Southwest era? And most importantly, what does it mean for you?
In this post:
Turbulence Ahead: How Southwest’s Finances Took a Nosedive
As with most shakeups in aviation, the root of the turbulence is economic. Southwest, which had boasted a record 47 consecutive years of profit before the pandemic, had started going downhill.
The airline reported a 46% drop in profits in Q2 of 2024, citing rising costs and operational inefficiencies. For context, Southwest used to spend about 80% of its revenue on operations back in 2015. That number had ballooned to 99% by 2023.
A big part of the problem is aircraft supply. Much of Southwest’s success story was its reliance on the Boeing 737, which allowed it to maintain flexibility and reduce costs.
Sticking to one kind of plane allowed them to significantly lower maintenance and parts costs, as well as eliminate the resources needed to train pilots on multiple aircraft models.
However, the same thing that had once allowed them to fly ahead of the competition became a liability when a strike at Boeing left the airline reeling with delays and production issues.
The airline was forced to continue flying older jets it had intended to retire, adding maintenance and operational complexity.
Investor Uprising: A $1.9B Stake and a Shakeup in the Cockpit
Here’s where things took a turn. Enter Elliot Investment Management. In mid-2024, the activist hedge fund took a $1.9 billion stake in Southwest and immediately began pressuring leadership to shake things up.
Their main criticism? That Southwest was clinging to a decades-old playbook that no longer worked in the razor-thin profit margins of today’s aviation landscape. They demanded the CEO, Robert Jordan, be fired. The airline’s stock was sagging, and a meltdown two years ago when it canceled thousands of flights exposed weakness in its leadership and operations, the investment firm said.
The airline was scrambling for modernization, and in September last year, Jordan laid out a three-year plan with radical changes:
Open seating? Gone Following competitors like Delta and United, Southwest is finally moving to assigned seating.
Red-eye flights are being rolled out for the first time as the airline restructures its network.
Elimination of the “Wanna Get Away” Fare: To be replaced by basic economy.
Extra legroom seats are now a thing: One small positive in a sea of bad. Silver linings, right?
These changes are going to be implemented by 2026. Furthermore, about two months ago, Southwest let go of about 15% of its workforce, or about 1750 employees. This is the first layoff in the company's history, and is expected to save the company $210 million this year and $300 million in 2026.
That bottom line is ruthless indeed.
But all of this pales in comparison to the biggest change. At the time of the initial announcement, Jordan promised that free baggage, the most loved of all perks, would not be going anywhere. Seems like he changed his mind.
This may no longer be the haven it used to be.
Goodbye to the last freebie in America:
The biggest selling point of Southwest was that Bags Fly Free. On a call with analysts last year, Jordan claimed that "After fare and schedule, bags fly free is cited as the number one issue in terms of why customers choose Southwest. So, it’s not something under consideration right now,”
However, the airline realized that this wasn’t exactly true.
When Southwest began selling tickets through third-party websites, like Kayak or Google Flights, it became clear customers were choosing price regardless of how generous Southwest’s policies were.
Jordan claimed adding bag fees would cost more than it would earn, but the numbers tell a different story.
If you need an idea of how much they stand to profit from this move, in 2023, American Airlines made $1.3 billion from checked bag fees, while Southwest made a measly $73 million in comparison. That’s how much they stand to gain.
And so starting from May 28, you can bid adieu to any freebie you hoped to get.
Southwest didn’t immediately reveal how much the checked bags will cost. And of course, there will be exceptions. Customers with a Southwest Airlines co-branded credit card can get one bag for free, and those with pricier tickets or the top-tier loyalty program will get one or two free checked bags.
Our thoughts…and the competitions:
Is a ship still a ship if you replace all its parts? Is Southwest still Southwest if you remove all these perks?
The world of profit margins is unforgiving, and unfortunately, Southwest's business model just wasn’t cutting it anymore. That lands us here, in the world where they’re sacrificing customer perks for investor satisfaction.
The competition knows this, and they’re cashing in. The CEOs of Delta, United, and Spirit all said they see this as an opportunity for them to fish in the now free waters of Southwest's customer base. Frontier has gone so far as to give free checked bags from May 28 to August 18.
And if you didn’t catch it, that's the exact date Southwest is ending its own policy. Talk about tough competition.
While we have our own opinions, do you think Southwest stick the landing and return to profitability, or crash and burn after dismantling the very brand identity that made it beloved?
