Alert – Southwest Airlines customers to lose biggest perk yet after investor shakeup triggers shareholder meeting

The axing of Southwest Airlines ‘bags fly free’ perk has moved a step closer in a fresh blow to its customers.

It is the only airline in the US not to charge, and it is passenger-friendly policies like this and open seating that have been its trademark.

In July, Southwest said it was ditching the open seating policy after half a century. Instead it will soon assign seats – charge passengers a fee to pick them early.   

This morning it emerged that an activist investor that wants an end the two free checked bags policy has hit a key ownership threshold that gives it power to make changes at the Dallas-based carrier. 

Bruce Sheridan wrote on X: ‘Oh, joy. Just watch. Here come the bag fees and fare increases. Byebye @SouthwestAir.’

Southwest Airlines offers two free bags, but that is set to change

And Jason Inquires tweeted: ‘If Southwest Airlines goes through with plan of getting rid of open seating, and then gets rid of their bags fly free policy…. why would you fly on Southwest?

Elliott Investment Management now holds 10 percent of Southwest’s common stock, Reuters reported on Tuesday morning. 

Hitting that threshold means Elliott – ees charging for bags as an opportunity to pull in tens of millions in fees – can call for a special meeting. 

All other US airlines charge, and last year such fees brought in billions of dollars of revenue for the likes of Delta, American, United, Spirit and Frontier. 

Fees of $30 to $50 a bag on Southwest would be welcome income for the financially struggling airline, analysts say. That could mean an extra $100 per flight for two bags.

Free bags is part of Southwest’s DNA, and has regularly featured in its adverts. Changing it could alienate its regular flyers.

Elliott outlined what they see as problems at Southwest in a letter to Southwest’s board in June. It pointed out Southwest’s stock price had dropped more than 50 percent in the last three years due to bad management.

The hedge fund, one of the world’s most powerful activist investors with $70 billion in assets under management, has demanded that CEO Robert Jordan and executive chairman Gary Kelly be ousted. 

Jordan, Southwest’s chief executive since 2022, has said he will not resign and has signaled to staff that he and other executives are ready to fight Elliott.

Elliott has signaled to other shareholders that it is ready to take next steps, including calling a special meeting.

A special meeting – used to solicit shareholder votes on matters that cannot wait until the next annual gathering – are rare. 

And if Elliott were to call one it would represent a major escalation of its fight with the carrier since its interest in the stock became public in June.

For years, Southwest appealed to cost-conscious flyers by not charging fees for a checked bag or changing a reservation.

Southwest Airlines CEO Bob Jordan is under scrutiny from activist investors who want to ax free bags

All major airlines in the US,including Delta, charge for baggage – apart from Southwest

Fees for baggage from the biggest gloabal airlines is on the rise

Its planes don’t have a premium cabin. 

Its closest rivals dropped change fees during the pandemic – meaning Southwest no longer stood out for that perk. 

And rivals like Delta and American are winning over upscale travelers with better seats and amenities.

A report out earlier this year showed how airlines including Delta, United and American pocketed a staggering $33.3 billion from just baggage fees last year – a sharp 15 percent rise from $29 billion in 2022.

This sum is solely made up of fees from larger carry-on bags, standard checked baggage fees, and fines for overweight or extra large checked bags and accounted for 4.1 percent of global airline revenue last year.