Airlines Strategy
Southwest Airlines Ends Free Bags and Open Seating Policies
Southwest Airlines introduces baggage fees, assigned seating, and new fare structures effective May 2025, aligning with industry trends.
Southwest Airlines Ends Free Bags and Open Seating: A New Era of Policy Changes
Southwest Airlines, long celebrated for its customer-friendly policies, is entering a new phase that redefines its brand identity. As of May 28, 2025, the airline is implementing sweeping changes to its baggage fees, seating arrangements, fare structure, and loyalty program. These updates mark a significant shift from the budget-friendly model that has defined Southwest for decades.
Historically, Southwest differentiated itself from competitors by offering two free checked bags and an open seating policy, features that appealed to cost-conscious travelers. However, mounting financial pressures, increased operational costs, and evolving industry standards have prompted the airline to reconsider these long-standing perks. These changes are being introduced at a critical moment as the airline industry continues to recover from economic disruptions and rising fuel prices.
For frequent flyers and occasional travelers alike, understanding these new policies is crucial. This article breaks down the key updates, the rationale behind them, and what they mean for Southwest’s future and for the broader airline industry.
Major Policy Changes: What’s New at Southwest?
Introduction of Checked Baggage Fees
Perhaps the most headline-grabbing change is the introduction of checked baggage fees. For flights booked or modified on or after May 28, 2025, passengers will now pay $35 for the first checked bag and $45 for the second. This is a stark departure from Southwest’s long-standing “bags fly free” policy that has been a cornerstone of its marketing and brand loyalty.
Passengers with a Rapid Rewards Credit Card will receive a credit for one checked bag. However, for the average traveler without this card, the additional cost may influence their choice of airline, especially when comparing total trip expenses.
This move aligns Southwest with legacy carriers like Delta, American, and United Airlines, which have long relied on ancillary fees as a significant revenue stream. According to the U.S. Department of Transportation, U.S. airlines collected over $5.3 billion in baggage fees in 2022 alone—a figure that continues to rise annually.
“Southwest’s move to charge for the first checked bag is a significant shift that may alter customer perceptions but is understandable as the airline faces rising operational costs,” Henry Harteveldt, Aviation Analyst
End of Open Seating and Introduction of Assigned Seats
Another major change is the gradual phasing out of Southwest’s open seating policy, which allowed passengers to choose their seats upon boarding. Starting in the second half of 2025, Southwest will begin offering assigned and premium seating options, with full implementation expected in 2026.
This transition will include the introduction of new seat types, such as standard, preferred, and extra legroom options. The move is designed to offer more choice and potentially generate additional revenue through seat selection fees, a model already used by most major airlines.
While some passengers appreciated the flexibility of open seating, others found it stressful and inconvenient. Assigned seating could improve boarding efficiency and reduce in-flight conflicts over seat selection, though it may also erode one of Southwest’s most unique features.
New Fare Structure and Expiring Flight Credits
Southwest is also rolling out a new baseline fare—dubbed the “Basic” fare—replacing the current “Wanna Get Away” fare. This new fare tier will be the most restrictive, offering the lowest price point but with limited flexibility. It mirrors similar basic economy fares offered by other airlines, which often exclude perks like seat selection and early boarding.
In addition, flight credits issued on or after May 28, 2025, will now have expiration dates. Depending on the fare type, credits will expire either six months or one year after issuance. Previously, Southwest flight credits did not expire, which was another customer-friendly policy that set the airline apart.
Flight credits issued before May 27, 2025, will not be affected by this change and will remain valid indefinitely. However, the new expiration policy may push travelers to use their credits more quickly and reduce the perceived value of booking flexibility with Southwest.
Why These Changes Matter
Financial Pressures and Industry Trends
Southwest’s policy overhaul comes in response to growing financial challenges. Rising fuel prices, increased labor costs, and global economic uncertainty have pressured airlines to seek new revenue streams. Ancillary fees—from baggage to seat selection—have become an essential part of the airline business model.
According to airline consultant Mary Kirby, “This change signals a broader trend of low-cost carriers adopting legacy carrier revenue models, focusing more on ancillary fees to boost profitability.” For Southwest, these changes could help stabilize earnings and provide flexibility to invest in service upgrades and fleet improvements.
Moreover, the timing of these changes—just ahead of the busy summer travel season—suggests a strategic move to capture additional revenue from high travel volumes. It also allows Southwest to observe customer reactions and adjust accordingly before the holiday season.
“This change signals a broader trend of low-cost carriers adopting legacy carrier revenue models,” Mary Kirby, Airline Industry Consultant
Customer Reactions and Brand Identity
These updates have sparked mixed reactions among Southwest’s customer base. Long-time loyalists are concerned that the airline is abandoning its original ethos, while others welcome the added structure and options that come with assigned seating and fare tiers.
Consumer advocacy groups have raised concerns about increased travel costs and the potential for confusion during the transition. They emphasize the need for clear communication and transparency to minimize customer dissatisfaction and maintain trust.
Southwest has responded by enhancing its digital platforms to better inform travelers of the new policies. The airline has also increased its customer service capacity to handle questions and complaints as the changes roll out.
Implications for the Broader Airline Industry
Southwest’s shift reflects a broader convergence between low-cost and traditional carriers. As competitive pressures mount and operating costs rise, more airlines may adopt hybrid models that blend affordability with tiered services and fees.
Globally, airlines are re-evaluating their pricing strategies to balance customer expectations with financial sustainability. The success—or failure—of Southwest’s new policies could influence other low-cost carriers to follow suit or double down on their existing models.
Ultimately, the airline industry is moving toward greater segmentation, where travelers pay for exactly what they use. While this can offer more choices, it also places a greater burden on consumers to navigate complex fare structures and hidden fees.
Conclusion
Southwest Airlines’ decision to end its free baggage policy and open seating model marks a significant evolution in its business strategy. These changes align the airline more closely with industry norms and reflect the growing importance of ancillary revenue in maintaining profitability.
While the updates may alienate some loyal customers, they also offer new opportunities for customization and efficiency. The coming months will be critical in determining how well Southwest manages this transition and whether it can maintain its reputation for value and service in a more competitive and complex marketplace.
FAQ
What is the new baggage fee policy at Southwest?
Passengers will pay $35 for the first checked bag and $45 for the second, starting May 28, 2025. Rapid Rewards Credit Card holders receive a credit for one checked bag.
Is Southwest eliminating open seating?
Yes, the airline will begin rolling out assigned and premium seating in late 2025, with full implementation expected in 2026.
What happens to flight credits under the new policy?
Flight credits issued on or after May 28, 2025, will expire after six months or one year, depending on the fare. Credits issued before that date do not expire.
Sources: Associated Press, Southwest Airlines Official Website, U.S. Department of Transportation
Photo Credit: Southwest Airlines
Airlines Strategy
Lufthansa Group Acquires 44.9% Stake in TAP Air Portugal
Portugal selects Lufthansa Group to acquire a 44.9% stake in TAP Air Portugal for €1.025 billion, beating Air France-KLM.
The Portuguese government has selected Lufthansa Group to acquire an initial 44.9% minority stake in state-owned TAP Air Portugal for €1.025 billion, a move that significantly expands the German aviation conglomerate’s footprint in the South Atlantic market.
In a press release issued on October 14, 2026, Lufthansa Group confirmed the selection of its cash-based offer, which outbid rival Air France-KLM. The transaction, which could scale up to a 49.9% stake for a maximum of €1.2 billion, positions Lisbon as a strategic hub for Lufthansa’s network connecting Europe to Brazil and Portuguese-speaking Africa.
The winning bid and strategic rationale
The decision concludes a competitive privatization process that narrowed to Lufthansa Group and Air France-KLM in April 2026. Both airline groups submitted improved final offers in early October 2026. According to reporting by TravelMole, the Portuguese government ultimately favored Lufthansa’s proposal because it was approximately 16% higher than the competing bid and structured entirely in cash, whereas Air France-KLM offered a combination of cash and shares.
“TAP Air Portugal is a strong and profitable airline, our long-standing partner in Star Alliance and internationally successful as a leading carrier on South Atlantic routes,” said Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG. “With today’s decision, the Portuguese government has paved the way for TAP Air Portugal to continue this success story together with Lufthansa Group.”
A statement from the Portuguese government highlighted the preservation of the airline’s national identity, describing Lufthansa as a strategic partner for growth that will maintain Lisbon Airport (LIS) as a central hub.
European consolidation and the Lusophone corridor
TAP Air Portugal operates an all-Airbus mainline fleet of over 90 aircraft. In 2025, the carrier transported 16.7 million passengers and posted a net profit of €4.1 million. The airline is highly coveted for its “Lusophone corridor,” providing extensive network connections between Europe, Brazil, and Portuguese-speaking African nations.
For Lufthansa Group, the acquisition aligns seamlessly with TAP’s existing membership in the Star Alliance. This avoids the complex integration process that would have been required to transition the Portuguese flag carrier to SkyTeam under Air France-KLM ownership.
Lufthansa already maintains a substantial presence in the country, operating 353 weekly flights to six Portuguese destinations. The group’s capacity in Portugal has increased by 75% compared to 2019 levels. Furthermore, Lufthansa Group employs over 500 skilled professionals in the country, a figure expected to surpass 1,000 by 2030 following the June 2026 groundbreaking of a new Lufthansa Technik facility in Santa Maria da Feira near Porto.
TAP’s path to privatization and next steps
Founded in 1945, TAP Air Portugal has experienced multiple ownership structures over the past decade. The airline was sold to a private consortium in 2015 but faced severe financial challenges during the COVID-19 pandemic, leading the Portuguese state to fully renationalize the carrier in 2020. The current privatization framework was designed to sell a minority stake of up to 49.9% while retaining 50.1% state control, with 5% of the shares reserved for employees.
Lufthansa Group, the Portuguese state holding company Parpública, and the Portuguese government expect to finalize and sign the transaction documents by the end of 2026. Official completion of the deal is targeted for 2028, pending regulatory approvals from the European Commission and relevant national aviation and competition authorities.
AirPro News analysis
Lufthansa Group’s successful bid for TAP Air Portugal marks another major milestone in the rapid consolidation of the European aviation market. Following its recent integration of Italy’s ITA Airways, Lufthansa is systematically absorbing the continent’s remaining independent national carriers, expanding its European market share to an estimated 12%. Securing TAP is particularly strategic because it neutralizes Air France-KLM’s ambitions in the South Atlantic while cementing Star Alliance dominance on routes to South America. The European Commission will likely scrutinize the deal closely, but the minority stake structure and the preservation of state control may help smooth the regulatory path compared to a full takeover.
Photo Credit: Lufthansa Group
Airlines Strategy
CADE Approves American Airlines $100M Stake in Azul
Brazil’s CADE approved American Airlines’ US$100M investment in Azul S.A., granting an 8% minority stake with governance conditions.
Brazil’s antitrust regulator has unanimously approved a US$100 million investment by American Airlines, Inc. into Azul S.A., granting the US carrier an approximate 8 percent minority stake in the Brazilian airline. The October 7, 2026, decision by the Administrative Council for Economic Defense (CADE) finalizes a capital injection critical to Azul following its exit from US Chapter 11 bankruptcy restructuring.
The approval, detailed in a CADE press release, is conditional upon a legally enforceable Merger Control Agreement (ACC) designed to implement governance and information safeguards. The transaction creates an unusual ownership structure in the highly concentrated Brazilian aviation market, as American Airlines now joins its primary domestic competitor, United Airlines, Inc., in holding an 8 percent equity interest in the same carrier.
Regulatory review and competitor opposition
The path to regulatory clearance involved significant scrutiny following objections from a rival airline group. On July 31, 2026, CADE’s General Superintendence (SG-CADE) initially issued a favorable opinion on the American Airlines investment, recommending approval without restrictions. This technical clearance was subsequently appealed by Abra Group Limited, the parent company of Brazilian carrier Gol Linhas Aéreas.
Gol maintains a long-standing commercial partnership with American Airlines. Abra Group argued that the investment required a deeper review by the CADE tribunal to assess whether the financial tie-up could harm competition on international routes between the US and Brazil or lead to coordinated effects among competitors.
The tribunal review specifically scrutinized competitive dynamics on key international corridors, including flights from São Paulo and Rio de Janeiro to Miami and Orlando. Regulators ultimately concluded that the investment would not eliminate competition in these markets. CADE noted that other major carriers, including LATAM Brasil and Delta Air Lines, continue to operate robust schedules on overlapping routes.
While dismissing the core anti-competitive concerns, the tribunal mandated the ACC to formalize boundaries around the partnership. Camila Cabral Pires Alves, the reporting commissioner for CADE, outlined the regulator’s rationale for the conditions.
“Minority stakes can produce competitive effects through different channels. It is necessary to understand the economic interest created by the investment, the influence rights associated with the participation, the information flows, and the concrete structure of rivalry in which these links are inserted.”
The formal decision and the associated ACC are expected to be published in October 2026, at which point the governance and information safeguards will become legally enforceable.
Azul’s financial restructuring and US airline investments
The US$100 million investment by American Airlines is part of a broader US$200 million capital injection designed to stabilize Azul. The Brazilian carrier emerged from US Chapter 11 bankruptcy protection on February 20, 2026, after completing a major financial restructuring to reduce debt and lease obligations.
The first half of that capital injection came from United Airlines. On February 11, 2026, CADE approved United Airlines’ move to increase its own minority stake in Azul to approximately 8 percent. Both investments were structured as integral components of Azul’s Chapter 11 reorganization plan, providing the airline with fresh equity capital to compete in a domestic market heavily concentrated among LATAM Brasil, Gol, and Azul.
The American Airlines investment is being executed through the exercise of subscription warrants, specifically identified as AZUL11 and AZUL19. The completion of this transaction solidifies American Airlines’ strategic presence in the Latin American aviation market, balancing its existing commercial relationship with Gol against a new equity position in Azul.
AirPro News analysis
The CADE approval cements a rare and complex market dynamic where two of the largest US legacy carriers hold identical minority equity positions in the same foreign operator. United Airlines and American Airlines fiercely compete on routes connecting the US and Latin America, yet both have now capitalized Azul’s post-bankruptcy balance sheet.
For American Airlines, the investment secures a strategic foothold in Brazil and hedges its regional exposure alongside its existing commercial ties with Gol. For Azul, the combined US$200 million from American Airlines and United Airlines provides essential liquidity to stabilize operations and fund network growth after its Chapter 11 restructuring. We expect CADE’s mandated information firewalls will be heavily scrutinized by industry observers to ensure neither US carrier gains an asymmetric advantage or access to proprietary data in the Brazilian market.
Photo Credit: Azul Airlines
Airlines Strategy
Pegasus Airlines Completes €154M Smartwings Acquisition
Pegasus Airlines finalizes €154M acquisition of Czech Airlines and Smartwings Group, forming a 175-aircraft combined fleet.
Pegasus Airlines has finalized its €154 million acquisition of Czech Airlines and Smartwings Group, securing a significant operational foothold in the Central and Eastern European leisure aviation market.
The transaction, officially completed on October 1, 2026, follows regulatory clearance and merges the Turkish low-cost carrier’s network with the Czech Republic’s largest leisure operator. According to a press release issued by Smartwings, the combined entity now operates a fleet of more than 175 aircraft.
Strategic expansion and dual-brand integration
The acquisition provides Istanbul-based Pegasus Airlines with direct access to the Central European market, strengthening its capacity in point-to-point and leisure travel between the European Union and Türkiye. Pegasus currently operates flights to 161 destinations across 57 countries, having carried a record 43.3 million passengers in 2025. Smartwings adds a network of 80 destinations across 20 countries to the group portfolio.
Moving forward, Pegasus Airlines will begin the operational integration of the Smartwings fleet and IT structures into its established low-cost business model. However, Smartwings will continue to operate under its own brand for passenger-facing operations, maintaining its daily flight schedules and customer relations.
Güliz Öztürk, CEO of Pegasus Airlines, noted that the company has grown its fleet from 14 to 127 aircraft since adopting the low-cost model in 2005.
A shared vision has emerged with Czech Airlines and Smartwings management: together, we aim to spread our wings across Europe with two distinctive brands, Smartwings and Pegasus Airlines. This integration is not just about growth, but about creating resilient, technology-driven companies that put safety at the heart of operations.
Regulatory hurdles and antitrust conditions
The path to finalizing the acquisition required navigating European competition regulations. On September 11, 2026, the Czech Office for the Protection of Competition (ÚOHS) granted conditional approval for the merger.
To prevent a monopoly on the highly trafficked Prague-Antalya route, the regulatory authority required Pegasus to transfer a specified number of summer-season airport slots to an independent competitor. This divestiture mandate will take effect beginning with the Summer 2027 scheduling season, ensuring continued market competition for leisure travelers flying between the Czech Republic and the Turkish Riviera.
Restructuring a historic European brand
The completion of the deal marks the final chapter in a lengthy corporate restructuring for Czech Airlines (ČSA), one of the world’s oldest airline brands. Founded in 1923, ČSA underwent significant financial reorganization following bankruptcy proceedings. The legacy carrier ceased independent flight operations on October 26, 2024, and was subsequently transformed into a holding company.
Under this new corporate structure, Smartwings, which was founded in 1997 as Travel Service, became the wholly owned operating subsidiary of the ČSA holding company. Smartwings operates scheduled, charter, and private business-jet flights, managing subsidiaries in Poland, Slovakia, and Hungary.
Pegasus Airlines initially signed the agreement to acquire the restructured Czech Airlines and Smartwings Group on December 8, 2025. The agreed transaction value of €154 million encompassed both companies and their related receivables. With the acquisition now closed, the combined group holds firm orders for 140 new aircraft to support future network growth.
AirPro News analysis
The acquisition represents a strategic pivot for Pegasus Airlines, allowing the Turkish carrier to deepen its penetration into the European Union’s point-to-point leisure market while bypassing some of the bilateral constraints that typically limit non-EU operators. By maintaining the Smartwings brand while integrating its fleet and IT infrastructure into the Pegasus low-cost model, the operator can leverage established European charter relationships without diluting its core brand identity. The required slot divestiture on the Prague-Antalya route highlights the strict regulatory scrutiny facing cross-border airline consolidation in Europe, even for predominantly leisure-focused networks.
Photo Credit: Smartwings
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