Competitors are circling Southwest after the airline announced it's going to start charging for checked bags

Core Viewpoint - Southwest Airlines is discontinuing its free baggage policy, which may lead to customer shifts towards competitors like United Airlines and Delta Air Lines, who view this as a potential opportunity for market share growth [1][2][9]. Group 1: Impact on Competitors - United Airlines' CEO Scott Kirby described Southwest's policy change as "slaying the sacred cow," indicating it could significantly affect Southwest's customer base [1]. - Delta Airlines' CEO Ed Bastian noted that customers who previously chose Southwest for its free baggage are now available for other airlines to attract [2]. - Amtrak also highlighted its competitive advantage by reminding customers of its free carry-on baggage policy [2]. Group 2: Southwest Airlines' Business Strategy - Southwest is under pressure from investors to improve its performance, as evidenced by a 26% decline in its stock over the past five years, compared to an 80% increase for United [6]. - The airline's recent changes, including the end of the free baggage policy and the introduction of basic economy fares, are part of a broader business overhaul aimed at addressing investor concerns [4][8]. - Southwest's CEO Bob Jordan stated that checked baggage was a critical factor for customer choice, emphasizing the need for this policy change to reduce costs associated with carrying more bags than competitors [4][5]. Group 3: Financial Performance and Revenue Sources - Ancillary fees have become a significant revenue source for airlines, with United reporting $4.5 billion in such fees in 2024 [3]. - Southwest's stock has decreased by 9% in the current year, reflecting ongoing challenges in attracting and retaining customers [10]. - The airline's passenger volumes remain below pre-pandemic levels, despite a strong demand for travel [6].