Customer Survey on Potential Bag Fees

Southwest Airlines Co. (NYSE:LUV) is exploring potential changes to its “bags fly free” policy as part of an effort to address suggestions from activist investor Elliott Investment Management. The airline recently surveyed select loyalty members and consumers regarding possible scenarios where lower-cost fares would incur bag fees. The survey, which includes questions on travel habits and booking preferences, aims to gauge customer sentiment on these potential policy adjustments.

Southwest Airlines has traditionally set itself apart with its policy of allowing passengers to check two bags at no cost, distinguishing it from other major U.S. airlines. CEO Bob Jordan had previously emphasized that the no-bag-fee policy was a key factor in customers’ choice of Southwest. However, the recent survey does not indicate any immediate plans to alter this benefit, with the airline stating it remains focused on understanding customer priorities and preferences.

Adapting Business Model Amid Investor Demands

The survey explores scenarios where the least expensive “Wanna Get Away” fares might only include a personal item and a carry-on, while “Wanna Get Away Plus” fares could include one free checked bag. Higher fare categories, including “Anytime” and “Business Select,” would retain the benefit of two free checked bags.

This move comes as Southwest Airlines is already implementing other significant changes to its business model, such as phasing out its free-for-all seating policy, introducing a new premium class, and starting red-eye flights. These changes are part of a broader effort to modernize the airline in response to pressure from Elliott Investment Management, which has called for a revamp of the company’s leadership and strategic direction.

Elliott, which disclosed its stake in Southwest in June, has critiqued the airline for not capitalizing on potential revenue sources, such as baggage fees. The global baggage fee revenue reached an estimated $33.3 billion last year. Southwest Airlines is scheduled to hold an investor meeting on September 26 in Dallas to outline its planned changes and strategies to better align with traveler preferences and enhance earnings.

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