A new pricing regime was the wind lifting Southwest Airlines (LUV 0.19%) stock on Tuesday. On the news that the company is falling in line with a current standard in the airline industry, investors lapped up its shares, to the point where they closed the trading day more than 5% higher in price. That compared most favorably to the benchmark S&P 500's (^GSPC +0.84%) barely over 2% gain.
Bags full of new revenue
Southwest announced Tuesday it will start levying on its passengers a $35 fee for one checked bag, and $45 for a second. Customers that hold Business Select or Choice Extra premium tickets can check two bags for free, while its A-List and Rapid Rewards credit card holders will be allowed to check one free of charge.
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The airline carrier is wasting no time implementing this new policy. It added that it will come into force on Wednesday, as it is to apply to flights booked for that day or afterward.
This did not come out of a clear blue sky; Southwest announced it would start charging for checked bags back in March. At that time, however, it didn't specify the fees.
The move is in line with a long-tail trend with airlines, which have been attempting for years to draw revenue from non-ticket fees. Many flyers opt for the cheapest tickets they can find to a destination; hence the desire by carriers to supplement ticket revenue.
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Complaining while complying
Southwest's new bag fees were likely inevitable, given the company's disappointing financial performance recently.
It remains to be seen whether the demise of its long-admired free bag check policy will lead to a defection in regular customers. I wouldn't imagine so, as travelers tend to grudgingly accept new fees such as this if their overall flight costs remain comparatively modest.
