A Southwest Airlines jet approaches Midway Airport on Dec. 15, 2023, in Chicago. (John J. Kim/Chicago Tribune/Tribune News Service via Getty Images)
John J. Kim | Chicago Tribune | Getty Images
Southwest Airlines‘ recent policies comparable to charging for checked bags for the primary time could backfire, Fitch Rankings said Thursday.
Southwest is reversing its decades-old two “bags fly free” policy for checked luggage in May, though there are exceptions for travelers with a Southwest bank card, elite frequent flyer status or who buy the very best classes of tickets.
Additionally it is launching assigned seating and a no-frills basic economy fare and said flight credits will expire.
Fitch issued a negative rankings outlook for the corporate, long known for its strong balance sheet, because “Southwest may shift to a less conservative capital allocation and financial policy, while ongoing strategic changes have the potential to affect its competitive position relative to network carriers.
“Items geared toward improving profitability comparable to the introduction of bag fees and expiring flight credits risk eroding Southwest’s competitive strengths relative to peers,” Fitch said.
Social media posts from Southwest, even in the event that they’ve been unrelated to policy changes, have drawn indignant comments in regards to the shifts, but market share loss, if any “is uncertain,” the firm noted.
Southwest declined to comment on Fitch’s recent outlook. The airline has been under more intense pressure to enhance margins since activist hedge fund Elliott Investment Management took a stake within the carrier and later won five board seats in a settlement last 12 months.
