Southwest Airlines Gets Bad News After Ending Free Bags

Earlier this year, Southwest Airlines made a groundbreaking change as the airline ended its longstanding "bags fly free" policy and began charging passengers for checked luggage. The move came as the struggling airline looked to boost overall profits. However, that did not happen this year.

Despite Southwest's decision to begin charging passengers for checked luggage, the airline still saw a massive slump in profits throughout the year.

Bags No Longer Fly Free

For decades, Southwest allowed all of its customers to travel with up to two checked bags, free of charge. However, back in May, the airline officially ended that policy.

In May, Southwest Airlines officially instituted checked baggage fees, adding a $35 charge for the first bag and $45 for each additional checked bag.

It was the most high-profile in a series of high-profile changes that Southwest made this year as it undergoes a major brand overhaul.

Southwest Profits Have Slumped

Though Southwest ditched free bags in an attempt to boost profits, those profits have not come through the first nine months of the year.

As CNBC reports, Southwest Airlines announced that its profits have actually fallen by 42 percent throughout the first nine months of the year.

The latest reported profit slumps come after Southwest reported no noticeable boost in revenue from checked bags charges back in August. In fact, executives admitted that basic economy sales slumped immediately following the checked bag charges, indicating that customers were turned off by the new charges.

Southwest CEO Bob Jordan has continually expressed optimism about the hypothetical revenue these new bag fees are expected to bring in, but the numbers simply have not backed up that reality.

Expert Reads Between the Lines

It's worth noting that despite the slumping profits, Southwest's stock has been soaring thanks in large part to the changes the airline continues to make, like assigned seating and premium seating options that will officially roll out next year.

“Because the assigned seating, the extra legroom, kicks in and there’s a lot of value in that, of course, [results are] going to be better year over year,” Southwest CEO Bob Jordan told CNBC earlier this month. “The bookings that we’re seeing reflect the business case for assigned seating and extra legroom.”

However, even if Southwest's future outlook does look promising to investors, one expert points out that the bag fees aren't exactly the reason for that, no matter what the executives say.

“One month of selling a ‘basic economy’ product they saw their revenue per available seat mile decline by .5 percentage point, and that’s with charging for bags,” Katy Nastro, travel expert at Going, told Customer Experience Dive back in August. “While they say bag fees are looking healthy, with softer demand, they’ve likely had to discount base fares which means they aren’t making pure profit from bag fees.”