Wednesday, May 28 was a big day in the history of Southwest Airlines. It’s the day the airline took a big step toward… being like everybody else. We knew this was coming, of course, but what we didn’t know was exactly how pricing of all these changes would look. Now we know.
The two big changes were the introduction of first and second bag fees along with a Basic Economy fare. Assigned seating comes later this year, so consider this a partial implementation of the full plan. Before getting into the weeds on this, I just briefly want to touch on the IT situation. Here is a live look at people checking bags at Southwest on the first day of implementation.
Of course, I’m kidding. This is quite obviously an AI-generated image, purposefully made so bad that it can’t be believable to anyone. I heard of no glitches. So let’s all pat Southwest’s much-maligned IT team on the back for getting this done on a very tight timeline.
Two Checked Bags, No Longer Included
In 2024, Southwest transported just shy of 132 million bags. That was the most of any airline by far. (Second place was American with 20 million fewer.) The vast majority of those bags were checked without any additional fee above and beyond the fare paid, but that changes now. Starting this week, Southwest has matched everyone else with a $35 fee for the first checked bag and a $45 fee for the second.
If nobody ever paid for a bag before, that would mean, what, an extra $5 billion or so a year in revenue? But of course, it’s not that simple.
First of all, people did pay for bags before. It probably wasn’t a huge number, but those who checked more than two bags had to pay. More importantly, however, not all of these first and second checked bags will pay in the future anyway.
Southwest won’t charge its top-level elites — A-List Preferred — anything for two checked bags. And its lower level A-List members get one checked bag free and a $10 discount on the second. Further, anyone holding a Southwest credit card will get a first checked bag included. Oh, and buying the top level Business Select fare — soon to be called Choice Extra when the new seating plan rolls out later this year — gets you two bags included.
We don’t know how many of those 130+ million bags were checked by people who won’t pay going forward, but we also know that even those who do have to pay extra to check a bag may have second thoughts. After all, that is what Southwest has argued for years, even as recently as last September’s investor day. It said that the revenue generated would be not offset the loss in share. Then it made an abrupt about-face.
What is clear is that Southwest checks more bags per passenger than other airline for two reasons. One, people who have checked bags will select Southwest because it ends up saving the money. And two, people don’t care about schlepping carry-ons as much when they don’t have to pay extra to check a bag. I would expect both of those trends to reverse.
Long story short, this won’t get anywhere near $5 billion in annual revenue, but we won’t really know for a long time what the actual value is, because this policy is based on when people bought their tickets. A lot of travel has been sold for this summer already, so we won’t know for a little while how much will be generated.
The Most Basic of Economies
And then there’s Basic Economy. Since this is all about pricing, we couldn’t really know what the upsells would look like until now. But now that it’s out in the open, we can analyze this more closely.
As expected at the start, this is purely stripping of benefits from existing fares. The old Wanna Get Away fare is now Basic, meaning no changes, lower mileage earning, and a credit that is only valid for six months from the date of issue. When assigned seats roll out, those will not be included in this fare either.
The idea here is to have a fare that better matches the lowest level at all the other airlines… and then hope that most people buy up to a higher level.
As of now, the higher level remains Wanna Get Away plus. That becomes just Choice when the new seating plan rolls out. But Southwest is hoping that the promise of a credit valid for 12 months, the ability to change, and the dream of a seat assignment in the back will be enough to woo people to pay more.
Just how much more? This we can see, though this will absolutely change over time.
I booked my last Wanna Get Away flight the day before the change went into effect, so I knew what pricing looked like. When the switch flipped, the old Wanna Get Away fare just became Basic. As for the buy-up, if I wanted it, it would be an extra $30 each way on these short-haul flights. It looks like longer-haul flights are $40 more.
Don’t expect it to stay this way. I imagine we are going to see significant fluctuation as they can test where people are willing to pay more and where they aren’t.
Even today, there are some strange exceptions around this plan, including when Basic is even made available. For example, looking at Southern California to Nashville, it’s all over the map.
At LAX, the bottom 10 fare buckets have Basic fares while those higher than that do not, so you get something like this on the website:
In Long Beach, however, it’s the bottom 9 fare buckets. And Ontario, Orange County, and San Diego don’t have Basic available at all. Why? It’s because in those markets, Southwest is only filing Basic fares that are valid with a minimum 30-day advance purchase.
Looking out toward December, the script flips. LAX has nothing inside of 30 days while Long Beach and Ontario have no Basic at all. But even where Basic does exist, it isn’t consistent. For example, look at LAX in December and Wanna Get Away plus is only $11 more than Basic.
Why? Because there are no Basic fares made available on the lowest fare buckets. In fact, it’s only available in December when booked in C class (which is not business as some might expect, just another coach bucket).
Whether this is some kind of elaborate test or if it’s just a mess from the previous fare structure that needs to be cleaned up, I have no idea. But Southwest’s goal here is undoubtedly to get as many people to buy up to a higher fare brand than they would have done previously. Basic doesn’t make money by being sold. It makes money by getting people to hate it so much that they’ll pay more for something else.
And so the grand Southwest experiment continues.
