In a significant shift from its long-standing policy, Southwest Airlines has announced that it will begin charging passengers for checked bags starting May 28, 2025. This move marks the end of the airline's popular 'two bags fly free' offering, which has been a cornerstone of its customer-friendly approach and a registered trademark.

Under the new policy, passengers who are not part of Southwest's loyalty program or traveling on its premium Business Select fare will be required to pay for checked luggage. The airline will continue to offer free checked bags to its most loyal customers: A-List Preferred members will still be allowed two free bags, while A-List members and Southwest credit card holders will be entitled to one free checked bag.

This decision represents a major change in Southwest's business model and comes in response to increasing pressure from activist investors, particularly Elliott Management. The airline has framed the move as an effort to 'deepen and reward loyalty' for its most engaged customers. Additionally, Southwest plans to introduce a basic economy fare and offer options for assigned seating and extra legroom.

The introduction of baggage fees is the latest in a series of changes at Southwest. In July 2024, the airline abandoned its open-seating model, allowing passengers to choose seats for a fee. At that time, and as recently as September 2024, Southwest had maintained that it had no plans to charge for checked bags, citing the policy as a key factor in customer choice.

This policy change brings Southwest more in line with industry standards. According to the Bureau of Transportation Statistics, U.S. airlines generated $5.5 billion from baggage fees in the first three quarters of 2024 alone.

For energy traders and analysts, this development in the airline industry could have indirect implications. Changes in airline pricing strategies and fees can influence travel demand, potentially affecting jet fuel consumption and pricing. Moreover, as airlines seek new revenue streams, it may impact their overall financial health and ability to invest in more fuel-efficient aircraft or sustainable aviation fuels.

The shift at Southwest also reflects broader trends in the transportation sector, where companies are reevaluating long-standing policies to adapt to changing market conditions and investor expectations. This evolution in the airline industry could have ripple effects on energy demand and consumption patterns in the aviation sector.