Fitch Issues ‘Negative Outlook’ as Southwest Airlines Faces Passenger Pushback Over Bag Fees

Southwest Airlines knows that its customers are angry about the removal of its free bags policy, but it doesn’t seem to be changing its tune.

Men’s Journal reports that Fitch Ratings has issued a “negative ratings outlook” for the discount airline after the new policy, given the pushback on social media and in person. The airline’s decision to eliminate its previous policy of no assigned seating has also contributed to the negative outlook.

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The social media posts from Southwest Airlines, even if unconnected to policy changes, have elicited angry responses over the revisions. However, any loss of market share “is uncertain,” according to the firm.

Fitch issued the negative outlook because “Southwest may shift to a less conservative capital allocation and financial policy, while ongoing strategic changes have the potential to impact its competitive position relative to network carriers,” according to CNBC.

“Items aimed at improving profitability such as the introduction of bag fees and expiring flight credits risk eroding Southwest’s competitive strengths relative to peers,” Fitch said in its report.

The airline has been pressured to boost profitability since activist hedge fund Elliott Investment Management purchased a stake in the company and later obtained five board seats in a settlement last year. However, Southwest Airlines declined to comment on the recent report issued by Fitch.

Southwest Airlines Will No Longer Allow Bags To Fly Free

Beginning May 28, Southwest will charge travelers for the first and second checked bags. These additional charges will not apply to the carrier’s Rapid Rewards A-list club members or those flying on a business fare.

“We have tremendous opportunity to meet current and future Customer needs, attract new Customer segments we don’t compete for today, and return to the levels of profitability that both we and our Shareholders expect,” Southwest President and CEO Bob Jordan stated in a March 11 press release.

“We will do all this while remaining focused on what’s made us strong — our People and the authentic, friendly, and award-winning Customer Service only they can provide,” he added.

The elimination of the free checked bags policy for regular fares marks a significant shift for Southwest Airlines, which has relied heavily on its “bags fly free” advertising to the extent of trademarking the phrase. That policy has been in effect since the airline’s inception roughly 60 years ago, and it has served as a crucial difference for Southwest compared to its many air travel competitors.