Investing.com -- Shares of Southwest Airlines gained in pre-open trading on Tuesday after the company announced it will start charging non-preferred customers for their first and second checked bags.
Southwest Airlines (NYSE:LUV) stock last traded up 11%. Before today, the stock had been down 16.2% year-to-date.
The airline said unless you’re a premium customer, you’ll be charged for every checked bag. Premium travelers—including Rapid Rewards A-List Preferred Members, Business Select passengers, A-List Members, select customers, and Rapid Rewards Credit Cardmembers (with one bag credit)—enjoy free checked bags. All others will face fees for their first and second checked bags (weight and size restrictions apply). These changes apply to flights booked on or after May 28, 2025.
Before today's news, Southwest’s “bags fly free” motto was an outlier in the industry.
The news comes as CEO Bob Jordan announced plans to boost the company’s operating margin to at least 10% in 2027 versus 2% reported in 2024.
"We have tremendous opportunity to meet current and future Customer needs, attract new Customer segments we don't compete for today, and return to the levels of profitability that both we and our Shareholders expect," Jordan said.
Today’s move from Southwest follows pressure from activist investor Elliott Investment Management. The hedge fund, with its nominees occupying five of 15 board seats, had criticized Southwest's leadership for not implementing baggage fees like other airlines to enhance revenue.
While shares of Southwest reacted positively to the baggage fee news, the company also lowered guidance for the first quarter, following similar news from rival Delta Air Lines (NYSE:DAL) overnight.
Southwest said it sees RASM up just 2-4% in the first quarter versus its prior guidance of up 5-7%. The company cited “higher-than-expected completion factor, less government travel, and a greater impact from the California wildfires than originally estimated.” The remainder of the cut is related to “softness in bookings and demand trends as the macro environment has weakened.”
CEO Jordan will present at the J.P. Morgan Industrials Conference today, March 11, 2025, at 11:15 AM ET.
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