Southwest Airlines (LUV) Will No Longer Allow Two Free Checked Bags for Passengers
Southwest Airlines (LUV) is ending its long-standing policy of allowing two free checked bags for most passengers. Starting Wednesday, passengers who buy Basic, Wanna Get Away Plus, or Anytime fares will now have to pay to check bags. While the exact fee hasn't been announced, other major U.S. airlines usually charge around $35 to $40 for the first checked bag. Southwest made this change after pressure from activist investor Elliott Investment Management, which pushed for cost-cutting and changes to the airline's business model in order to boost profits.
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Along with charging for checked bags, Southwest is introducing a Basic fare similar to what airlines like Delta (DAL), American (AAL), and United (UAL) already offer. This new fare doesn't allow for ticket changes, it boards last, and has fare credits that expire in six months instead of a year. Southwest is also ending its old 'Wanna Get Away' fare and moving toward assigned seating for 2026 flights. In addition, planes will be updated with more legroom seats, and mobile bag-tag printers will be added at airports to speed up the check-in process.
However, it is worth noting that some travelers will still get free bags, including those with Business Select tickets, A-List loyalty members, and holders of a co-branded Southwest credit card (and their travel companions). Free carry-on rules aren't changing, so Southwest expects more passengers to bring bags onboard. Interestingly, even though the change upset some customers, CEO Bob Jordan said that it hasn't hurt bookings. He also noted that these changes are aimed at making Southwest more efficient and competitive in a tough market.
Is LUV Stock a Good Buy?
Turning to Wall Street, analysts have a Hold consensus rating on LUV stock based on five Buys, six Holds, and five Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average LUV price target of $30.47 per share implies 1.6% downside risk.
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