Southwest Airlines Now Charges for Bags — as of May 28
Not sure if you caught the news — Southwest Airlines just announced it will start charging for checked bags, a significant departure from its long-standing “Bags Fly Free” policy.
This isn’t just a pricing change — it’s a strategic shift that repositions the airline both in terms of revenue model and brand identity.
Starting today (May 28, 2025), Southwest will charge:
- $35 for the first checked bag
- $45 for the second
- Exemptions: A-List members, business fare travelers, and co-branded Southwest credit card holders.
Pros of Charging Baggage Fees
- Still Rewards Loyalty – Loyalty members and business class passengers retain free bags
- Massive Revenue Opportunity – In 2024, Southwest made just $83M from checked bag fees, despite carrying 2–3x more checked bags than peers. Competitors typically make in the range of $1.5 – $1.8B in baggage fees. But, Southwest made up for that By matching competitors and assuming they keep their baggage volume (which they likely wont), Southwest could unlock $1.2B–$2.5B/year in new gross revenue.
- Investor Confidence
Investors want to see margin growth. This is a low-effort lever to expand EBITDA without cutting services.
- Competitive Parity
United, Delta, and American already charge $35–$40. Southwest no longer stands out as “missing” revenue. They’re no longer leaving money on the table.
Cons of Charging Baggage Fees
- Erosion of a Core Brand Promise
“Bags Fly Free” has been Southwest’s differentiator for decades — it’s even trademarked. Removing it risks breaking customer trust and diluting brand equity. - Volume Loss Will Undercut Revenue
Their high bag volume wasn’t because people love checking bags — it was because it was free. Introducing fees will reduce checked baggage volume (likely by 40% or even more), minimizing the revenue upside. - Customer Experience Will Suffer
Expect longer boarding times, more crowded overhead bins, and frustrated travelers who now try to avoid fees. - Commoditization Risk
Southwests full priced tickets are more expensive than others. Their attraction was to those who can plan ahead and tap into the ‘wanna get away’ prices for their tickets. Anyone else who wanted free bags would end up paying more (but still lesser than ticket + bags for the others). With Southwests new move, their price, schedule, and product all start to look the same as other airlines and in some cases Southwest comes out being worse (the other airlines Delta, American in particular have nicer/newer planes). Brand distinction erodes, and price sensitivity increases.
What the data says?
- Southwest’s passenger base includes a high share of families and value travelers, who are very fee-sensitive
- JetBlue, after introducing bag fees, saw a 15–25% drop in checked baggage volume
- Delta and United generate $1.4B–$1.7B annually from baggage fees — despite lower bag volumes than Southwest.
What the market looked like in 2024?
- Southwest Airlines holds a 17.3% share of the U.S. domestic market, closely trailing Delta Air Lines (17.8%) and American Airlines (17.5%).
- The combined market share of the top four carriers amounts to approximately 68.6%, underscoring the industry’s concentration.
- Alaska Airlines, Spirit Airlines, JetBlue Airways, and Frontier Airlines collectively contribute an additional 19.2% to the market, while the remaining carriers account for 12.2%.
This data highlights the competitive landscape of the U.S. domestic airline industry, with the “Big Four” dominating the majority of the market.
| Rank | Airline | Market Share (%) | Revenue Passenger Miles (RPM) |
|---|---|---|---|
| 1 | Delta Air Lines | 17.8% | 142 billion |
| 2 | American Airlines | 17.5% | 139 billion |
| 3 | Southwest Airlines | 17.3% | 138 billion |
| 4 | United Airlines | 16.0% | 127 billion |
| 5 | Alaska Airlines | 6.1% | 49 billion |
| 6 | Spirit Airlines | 4.9% | 39 billion |
| 7 | JetBlue Airways | 4.7% | 37 billion |
| 8 | Frontier Airlines | 3.5% | 28 billion |
| 9 | SkyWest Airlines | 2.4% | 19 billion |
| 10 | Hawaiian Airlines | 1.7% | 14 billion |
| — | Other Carriers | 8.1% | 64 billion |
What were their revenues?
| Airline | Total Revenue (USD) | Source |
|---|---|---|
| Delta Air Lines | $61.6 billion | Delta Air Lines 2024 Financial Results |
| United Airlines | $57.1 billion | United Airlines Holdings Inc Revenue 2010-2025 |
| American Airlines | $54.2 billion | American Airlines reports fourth-quarter and full-year 2024 financial results |
| Southwest Airlines | $23.0 billion | Southwest Airlines Lifts Revenue Outlook on Resilient Travel Demand |
Delta Air Lines led the industry with the highest total revenue in 2024, followed closely by United Airlines and American Airlines. Southwest Airlines recorded significantly lower total revenue compared to its counterparts, reflecting its low-cost carrier model and focus on domestic routes. So, in doing what they are doing and have done so far, Southwest is makign a move away from being a Low-cost carrier (LCC) to being a full service carrier. This broad redefinition of the company comes with huge risks. Differentiation is a hard thing to build (more on this soon) and it seems someone at Southwest is taking that “asset” lightly.
In summary, does this move pay off?
In the short term — yes.
Long term — its super risky.
They are trading away a legendary differentiator, and they are taking a huge risk by trading it for parity pricing. They will gain in ancillary revenue but could lose big time on brand differentiation and that can lead to revenue leaks that are much larger than the potential gain. The answer to “Why choose Southwest? was much easier earlier, but not anymore. Looks like “the skies are getting less friendly”