2 days Ago By Alexander Mitchell
Recently, Southwest Airlines announced that it would be ending its decades-old policy of offering passengers two free checked bags. This is one of many moves taken by the airline, which has for around six months been under the heavy influence of activist investment management firm Elliott Management , to help the carrier turn its streak of poor financial performance around. The airline has taken several steps in recent months to help reduce its operational cost footprint and improve its financial performance .
Get all the latest aviation news from Simple Flying! However, Southwest's competitors undeniably smell blood in the water, and they have been quick to act to counteract the airline's latest series of moves. The CEOs of both United Airlines and Delta Air Lines have discussed what they believe this change will mean for the industry's competitive dynamics, both addressing the policy shift last Tuesday. This move further demonstrates the massive pressure that Southwest Airlines is facing from investors, something which has led the airline to restructure its operational model .
A deeper look at competitor reactions to Southwest's latest move Southwest Airlines has decided to ditch its trademark free checked bag policy, something that the airline's competitors have indicated they think is a good sign for their competitive prospects. The CEOs of United Airlines and Delta Air Lines both indicated on Tuesday that this policy change could lead some price-sensitive customers to switch away from Southwest. Quite possibly the strongest demonstration of just how big of a blow this could be to Southwest Airlines came from United Airlines CEO Scott Kirby, who said that removing the free bags perk was like "slaying the sacred cow.
" According to Business Insider , the CEO also had the following words to share at an industrials conference led by financial giant J.P. Morgan: "It will be a really big deal for Southwest.
It would be good for everyone else." Ed Bastian, Delta's CEO, made similar comments in the wake of Southwest's decision. He said that there are certainly some customers who exclusively choose Southwest because of the free bag policy, and that these customers will likely now be open to booking with other carriers.
As the leader of an airline that has specialized in capturing large market shares on the most competitive routes, it is unsurprising that Bastian believes this move could be a good sign for the carrier. US-based rail operator Amtrak also sought to try and capitalize on Southwest's decision to eliminate its free checked bag policy. The train transport company indicated in a post on social media that passengers are all offered multiple free bags when traveling on an Amtrak service.
The United States commercial aviation industry is extremely competitive, with Delta, Southwest and United all vying for market share. Southwest Airlines alleged that the City of San Antonio had already determined which airlines would get gates at the new terminal. A deeper look at the competitive pressure facing Southwest Airlines Last Tuesday, Southwest decided that its legendary bag policy would now only apply to a select group of elite status members starting on May 28th.
Those who do not qualify for this benefit will be required to pay for both their first and second checked bags. Back in July, Southwest Airlines CEO Bob Jordan said that after overhauling the company's fare and schedule system, checked bags would be one of the biggest issues for Southwest customers. Southwest's objective, as per Jordan's rhetoric, is to leverage the lack of free checked bags to spur sign-ups for Southwest Airlines' cobranded credit cards .
Jordan also noted that carrying large amounts of free checked bags increases the airline's costs exponentially. The carrier has seen significant stock price decreases over the past five years, but share prices have increased since last August by over 40%..
