Southwest Airlines, long known for its customer-friendly perks, is making a major change that signals a shift in its business strategy. The airline, famous for its “Two Bags Fly Free” policy, will soon start charging most passengers for checked luggage. This decision, announced amid cost-cutting efforts influenced by activist investor Elliott Investment Management, marks a significant departure from a key selling point that set Southwest apart from competitors.

The change will take effect for tickets purchased on or after May 28 and will not apply to the airline’s highest-tier loyalty and business travelers. This move follows other major operational shifts, including mass layoffs and the potential end of its open seating policy.

Change Is an Essential Part of Business

While some customers may see this as a betrayal of Southwest’s long-standing value proposition, the reality is simple: businesses evolve, and what once worked may not always be sustainable. The airline industry, in particular, is one of the most challenging sectors, constantly facing rising fuel costs, labor expenses, and external pressures from investors.

Southwest’s free-bag policy was a marketing differentiator, helping to attract customers looking for a more transparent pricing model. However, as financial pressures mount, the airline must adapt to stay competitive and profitable.

If It’s Not Making Money, It Has to Change

Companies often introduce loss-leader offers—services or products that don’t generate direct profits but serve as an incentive to attract customers. These tactics work as long as the business model supports them. But when costs outpace revenue, even beloved policies must be reconsidered.

We’ve seen similar scenarios before:

• Red Lobster’s “Endless Shrimp” fiasco led to financial losses when customers took full advantage of the offer.
• MoviePass’s unlimited movie subscription crashed when demand exceeded profitability.
• Amazon’s free shipping perks were originally more generous but later adjusted as costs increased.

Southwest is making a tough but necessary decision, acknowledging that free checked bags, once a unique selling point, may no longer be a viable perk in the current financial landscape.

Every Offer Won’t Last Forever

No business model is static. Offers, promotions, and even core features change over time. Just because something was once a great idea doesn’t mean it will work forever. Think of it like this: would your business still be giving away a popular freebie if it was losing money year after year?

Southwest’s decision might upset loyal customers, but ultimately, the airline has to prioritize its bottom line. What started as a brilliant marketing strategy may no longer be financially sustainable.

Gimmicks Work—But Profitability Matters More

Attention-grabbing promotions are great for customer acquisition. However, the real measure of success is whether they convert into long-term profitability. A business can only keep offering “freebies” if it can absorb the cost elsewhere—either through higher pricing, increased customer retention, or alternative revenue streams.

Southwest’s move is a lesson for entrepreneurs:
✅ Attract attention, but don’t sacrifice profitability.
✅ Know when to pivot your pricing and promotions.
✅ Monitor your financials—are your offers helping or hurting your bottom line?

Are You Losing Money on Your Offers?

For business owners, this is a perfect moment to reevaluate your own pricing strategies. Ask yourself:

• Am I offering a service or product for free that’s no longer sustainable?
• Is my pricing model aligned with my long-term business goals?
• Am I giving away too much just to keep customers happy, at the expense of profitability?

Southwest’s decision may frustrate travelers, but from a business perspective, it’s a lesson in sustainability. The airline is doing what many companies are afraid to do—making a tough call to ensure long-term success.

What about your business? Is it time to rethink your pricing, perks, and profitability? 🚀

Related: How to deliver a great customer experience every time

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