Southwest's chief executive once made a promise: “You’re not going to see basic economy from Southwest. That’s not what we do … They unbundle, and we don't.”
That was nearly six years ago. Now, the carrier that was once the titan of all U.S. airlines is on the ropes: losing money, scrambling to keep a bloodthirsty activist investor at bay, and mulling fundamental changes to its entire business model. And the man who swore Southwest would never sell basic economy fares, former CEO Gary Kelley, is soon getting pushed off the board altogether.
Beloved by millions of flyers for doing things differently than the rest of the airline industry, Southwest is under pressure from investment fund Elliott Management Group to make more money … by doing what its competitors have been doing for years. Is 2025 the year Southwest finally joins the rest of the industry in charging extra fees and selling stingy basic economy fares?
Southwest declined to comment for this story, saying only that they “look forward to sharing an update on our business plan at Investor Day next week” on Sept. 26. But Southwest has already unveiled a few changes that would lay the groundwork for introducing basic economy – or something like it:
- Out of nowhere this spring, Southwest fares began appearing on Google Flights and later, Kayak – a monumental change for an airline that always forced travelers to use its site or app to buy tickets
- And just this summer, Southwest announced it would finally begin assigning seats, ending its controversial open-seating policy while installing some extra legroom seats on its fleet of Boeing 737s, too
Neither of those changes mean Southwest will start selling basic economy for certain … but the pieces do fit. Now that travelers are comparing Southwest (and its often higher prices) against other airlines through Google and other platforms, a basic ticket would give them an apples-to-apples comparison against the likes of United, Delta, American, and budget carriers. And assigning seats means Southwest can start charging for seats – or withholding it altogether.
As much as travelers may loathe the lack of flexibility and dread the thought of a random middle seat, there's a reason why every other U.S. carrier has introduced basic economy over the last decade: It works. So what’s in store for Southwest flyers?
Really? Basic Economy on Southwest?
Once America's steadiest and most financially successful airline, Southwest is in trouble.
A Wall Street darling that posted decades of consecutive profits even as other carriers lost money, the airline has been struggling financially in the post-pandemic travel boom. Americans' travel preferences are changing, from their willingness to pay up for premium seats (which Southwest doesn't have) to their eagerness to fly to Europe (where Southwest can't bring them).
The airline has been promising big changes on the horizon, all leading up to its investor day next Thursday, Sept. 26. It's a day that all U.S. travelers should have on their calendar.
Here's the problem: Southwest needs to make more money. They need to fill more planes with more customers. And they need a way to get more higher-paying customers on them, too.
Some version of basic economy would help Southwest accomplish those goals, boosting revenue by filling more seats and raking in more in additional fees. But let's back up.
Southwest has been dubbed a “low-cost carrier” for years, but that's about their costs – not yours. The reality is that Southwest fares are routinely pricier than competitors like Alaska, American, Delta, and United … but that's not a fair comparison. While other carriers have raised baggage fees to $35 each way or more when heading abroad, every Southwest fare still includes not one but two free checked bags.
Southwest got away with it for years by not just conditioning but forcing travelers to search directly at Southwest.com – price shopping took an extra step that loyal Southwest simply wouldn't take. But now that they're trying to expand their reach by showing up next to competitors on Google Flights and other platforms, the apples-to-oranges comparison could be hurting them.
Here's an example. At first glance, Southwest appears like the most-expensive option by far on these flights from Minneapolis-St. Paul (MSP) to Denver (DEN).
But will travelers do the math and understand that checking a bag each way would raise the all-in cost of those other flights to at least $193? Or realize that those United basic economy and Delta basic economy tickets can't be canceled for a voucher without forfeiting a hefty fee, while Southwest tickets can always be canceled for a credit that never expires? Or that the United fare doesn't even allow you to bring a carry-on bag?
We doubt it. That's a huge disadvantage for Southwest – and one they'll surely try to remedy with these upcoming changes.
Elliott Management, the outspoken investment fund that has taken a huge stake in Southwest, has explicitly called for the airline to start adopting the policies of its (more financially) successful peers. They've called for a change in leadership, including ousting CEO Bob Jordan as well as former CEO and current executive board chairman Gary Kelly – and got their wish last week.
And in its pitch to do all that, Elliott called out Southwest for ruling out “industry-standard commercial initiatives” like basic economy and charging bag fees.
What is Basic Economy on Other Airlines?
Basic economy is a scourge, but it's here to stay. Love it or hate it, it's a powerful tool.
It was introduced by the major U.S. carriers as a way to fend off competition from ultra-low-cost carriers. Those airlines sold bare bones fares at a fraction of what the, instead charging extra fees for everything from seat selection to bags to fare changes to snacks.
Basic economy was the solution – a way for full-service airlines to compete on price. Every airline's basic economy ticket is slightly different, but they share some common features:
- You can't change your ticket and canceling for a voucher incurs a hefty fee – if you can do it at all
- Seat selection is not complimentary, though you can often pick a seat for an extra fee
- You'll board the plane last
- You may not earn miles or credit toward elite status with the airline
- Bag fees to Europe and other international destinations may be $75 or more each way, while that's still free with a standard economy ticket
- Delta now bans travelers with a basic economy ticket from visiting a Sky Club lounge
- On United Airlines, basic economy doesn't even come with a carry-on bag!
Read Next: Basic Economy Fares: What You Get & Why You May Want to Avoid Them
But they all share the same purpose: Lure price conscious travelers in with a cheaper, stingy fare, then upsell you to a pricier main cabin fare (you know, the one they wanted to buy in the first place) – and above all, to make more money. Case in point: Airlines keep charging more and more to avoid basic economy.
A decade later, it's clear that basic economy has won the war. Low-cost carriers like Spirit and Frontier are ditching their pure, a la carte pricing model amid serious financial struggles.
While Southwest isn't exactly fighting for survival, change is on the way.
What Would Southwest Basic Economy Look Like?
We don't know. And, to be clear, we don't even know for sure that Southwest will pursue a basic economy-like ticket as part of its path forward.
One thing's for sure: If they do, they definitely won't call it “basic economy.” Southwest doesn't name anything like its competitors do. Currently, the cheapest option among its four different fare types are called “Wanna Get Away.” Maybe those cheap, Wanna Get Away fares will include less than they do today?
But we're betting at least one piece of Southwest's transition will include some spin on what travelers have come to know and loathe about basic economy.
We wouldn't be surprised to see Southwest to unveil a fare that doesn't include free seat selection. As it finally abandons its open-seating model, charging passengers to pick a seat is a certainty. That's why they're doing it.
Additional fees are simply too valuable to the U.S. airlines. They either want you to fork over extra dollars to choose a seat off the seat map or pay more for a that includes complimentary seat selection. For an airline like Southwest that is struggling to make money, seat selection fees are a no-brainer – especially since they're practically expected by travelers at this point.
The biggest question on most Southwest flyers' minds is the airline's “Bags Fly Free” policy: Long after airlines started charging for luggage, every Southwest ticket still includes two free checked bags. After unveiling the plan to assign seating in July, Southwest CEO Bob Jordan vowed that Southwest's free bags policy isn't going anywhere.
“We are not looking to change that policy,” Jordan said in the airline's earnings call.
Yet it's hard to see how Southwest could successfully implement some form of basic economy while still giving every passenger two free checked bags. Maybe Southwest could thread the needle? Maybe the airline will try to explain away the discrepancy if most passengers still get two bags free – so long as they don't buy the cheapest ticket? Or maybe they limit the cheapest tickets to just one free bag, collecting bag fees on the second?
That leaves us with one, critically important aspect of basic economy: Ticket flexibility.
Free change and cancellation has been a hallmark of Southwest, decades before airlines did away with change fees during the worst of the pandemic. Could Southwest make its cheapest fares less flexible, or subject to some sort of a change fee? I'll admit, I don't know … but if Southwest's focus is on generating additional revenue through fees, this seems like a way to do so.
Currently, Southwest offers a Wanna Get Away Plus fare that gives travelers transferable vouchers, free same-day changes, and other small benefits. Could Southwest make that slightly more expensive fare the one that gets free changes and cancellation, leaving Wanna Get Away travelers with less flexibility for a discount?
I truly don't know, and that will be among the first things I'm looking for during the Investor Day presentation later this month.
Bottom Line
The biggest changes to Southwest Airlines in company history are on the horizon. Could that include doing what it said it never would: selling stingy basic economy tickets?
Again: We don't know … but for the first time ever, it feels like a strong possibility. The airline is under serious pressure to make more money, and basic economy is a tried-and-true money-maker for other carriers. While the biggest news is yet to come, some of Southwest's moves earlier this year could be seen as necessary steps to introducing some version of basic economy.