Checked bags are becoming more expensive in the United States, with carriers across the board upping their fees due to a spike in jet fuel prices as a result of the ongoing conflict in Iran. Traditionally, this was an advantage for Southwest Airlines customers, who would have been unaffected by such practices in the past because the carrier offered all passengers two complimentary checked bags.

In 2025, however, this became history, as Southwest began charging for bags, which increased in April 2026 to $45 for the first bag and $55 for the second per direction per person. A family of four, with each checking one bag, would now have to pay $360 on a round-trip ticket. That’s hardly ideal, considering that complimentary bags were once considered a strong reason to fly Southwest.

The optics aren’t great for the carrier either, considering that the carrier already hiked its fees less than a year after introducing checked-bag surcharges. However, Southwest Airlines is just following the industry trend, which it has done to fully overhaul its full business strategies, and has so far been successful.

The Changes At Southwest Airlines

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Southwest Airlines today bears little resemblance to even its form in 2019. The carrier charges for checked bags, a controversial move, but it also assigns seats and charges for specific seat selections, in contrast to its long-standing ‘open-seating policy’ that was discontinued in January 2026. In addition, Southwest now offers extra-legroom seating, with talks of proper premium cabins on the horizon, sells basic economy tickets, and the carrier has also made significant operational changes as well.

Southwest’s policies and business practices remained largely the same throughout its 50+ year history, and its unique offering was popular with many of its most loyal customers. To see so many changes happen within such a short amount of time was jarring, to say the least, and many of these changes proved unpopular since they directly resulted in passengers paying more money. Today, Southwest is essentially the same as any of the three legacy carriers, but of course, this was the point.

Southwest Airlines was profitable for 47 years straight until the COVID-19 pandemic. Every airline lost money during the pandemic, but afterward, Delta and United recovered in tremendous form, while Southwest did not. A company can have an amazing track record, but it doesn’t mean anything if it doesn’t make money today. As a publicly traded company, Southwest has an obligation to its shareholders and has therefore made these changes to improve financial performance.

The Impact Of Elliott Investment Management

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In 2024, activist investment firm Elliott Investment Management purchased a roughly 11% stake in Southwest Airlines, arguing that company leadership had failed to evolve post-pandemic and directing blame squarely at top leadership. The firm advocated for the Executive Chairman of the Board, Gary Kelly, and CEO Bob Jordan to be removed from their positions, creating a website demanding ‘a stronger Southwest’ while publishing a letter to Southwest shareholders advocating for its proposals.

While Jordan kept his job, Gary Kelly subsequently retired from his position, joined by the carrier’s chief financial officer and chief administrative officer, while two board positions were eliminated. Since then, Elliott increased its stake in the airline, and it was under the firm’s influence that Southwest began radically shifting its business strategy. The added fees and heavier focus on price segmentation were an effort to boost revenue, while the operational changes were cost-cutting efforts.

Elliott has reduced its stake in Southwest Airlines, but the firm still remains a significant investor. What’s more, the impact of Elliott’s influence on the carrier will be long-lasting, as it won’t reverse any of the changes. Southwest is now permanently a different airline than the one that long-time flyers remember flying, and this has significant implications for the brand that Southwest has spent decades building, which was, at one point, one of the most beloved brands in the US.

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The Challenge With Southwest’s Changes

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In the midst of making changes to its business and operating model, Southwest risks alienating its most valuable customers: loyal flyers. It’s significantly more expensive for companies to attract new customers than to retain existing ones, and Southwest had an almost cult-like following for decades. As competitors moved to assigned seating and began adding surcharges, Southwest became a haven for passengers who liked the increasingly unique experience.

With a loyal customer base, low operating costs, and a strong network, Southwest was able to weather storms that sent competitors to bankruptcy court, while others went out of business altogether. Throughout downturns such as the Great Recession or the years following the September 11th terrorist attacks, Southwest remains profitable.

Today, however, the Southwest brand has been significantly watered down from what it originally represented. At best, Southwest offers little to keep customers away from rivals, and at worst, it’s angered previously loyal customers. Southwest Airlines has a mammoth domestic network, which is a competitive advantage, but the onboard experience is essentially the same as Delta’s or United’s, minus the screens.

What’s more, there’s still no true premium product in the sense of a domestic first class cabin, and no long-haul network beyond its partnerships with the likes of Icelandair and China Airlines. As such, customers, both loyal and new, now find themselves asking what’s different about Southwest, and why they should give their business to it rather than Delta Air Lines, where they can earn miles to be used for premium cabins or flashy international vacations.

The Counterargument For Southwest’s Shift

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Other than network, Southwest will have to compete on price against competitors, which is a difficult game to play. This is traditionally a tactic heavily employed by low-cost airlines, but Southwest is not strictly a low-cost airline. With high operating costs and a relatively comfortable economy experience, it’s essentially a hybrid airline.

This can be done successfully (see Alaska Airlines), but can also be an awkward market position (see JetBlue), especially when Southwest has essentially removed every quality that made it unique. Today, however, Southwest Airlines is profitable. Southwest reported a net income of $227 million for the first quarter of 2026, contrasting with its $149 million loss for the first quarter of 2025.

Despite angering some flyers with its changes, Southwest has significantly boosted ancillary revenue, and it’s only aligned with current industry trends. While the open-seating policy was popular with some loyalists, studies indicated that it was also the number one reason that customers booked away from Southwest, and its behind-the-scenes changes only served to make the airline more efficient with no real downside. At the end of the day, Southwest’s onboard experience and strong domestic network remain compelling.

The airline has also made changes to further strengthen its network. It’s pulled back from competitive airports like Chicago-O’Hare, Atlanta, and Fort Lauderdale, while building up hubs where it holds a strong market position, including Chicago-Midway, Nashville, and Orlando. While it’s only been roughly a year-and-a-half since Elliott appeared, Southwest appears to have successfully navigated its transition, and only time will tell if its success will continue.

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How Southwest Will Tackle Crises

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The airline industry is facing uncertain times. Already, the majority of profits in the US are being made by Delta Air Lines and United Airlines, while most of the rest of the crowd is barely breaking even or losing money. Southwest is now moving into the first category, but the industry is now facing a new challenge with the current rise in oil prices. Fuel is one of an airline’s largest expenses, and every carrier will therefore need to cut costs while still ensuring that they’re maximizing revenue.

Southwest has yet to implement higher fares across its network as some airlines have, but it has bumped up fees for checked bags by $10, matching similar moves by competitors. The optics might not be great, considering that bag fees are relatively new at Southwest, but it’ll have little impact on whether customers continue to choose it over rivals. With strong market positions in multiple hubs, the carrier still has a loyal following, even if it’s less about the in-flight experience today than before.

While Southwest’s old business model helped it succeed during prior downturns, its improved success indicates that its current path was the correct strategy. What’s more, the industry has changed drastically over the past few decades, and Southwest’s competitors are hardly the same companies that they were in the 2000s or the 1990s. As such, expect Southwest to remain similar to the legacy carriers, charging high fees while further diversifying its premium offering, with future financial success likely in the airline’s future.