Southwest Airlines (LUV) stock jumped on Monday after the airline company provided reasons for its updated bag check policies. CEO Bob Jordan claimed that the update, which went into effect on May 28, was “really about choice.”
Don’t Miss TipRanks’ Half-Year Sale
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
According to Jordan, ditching the two free checked bags in favor of fees for any checked bags was about meeting the “customer’s needs and wants” and that customers “want a lot of choice.” Under the new policy, a checked bag costs $35 to $40 for the first and $45 to $50 for the second.
Of course, there are ways to get around this. A-List passengers and Southwest Airlines’ credit card holders can still check one bag for free. Additionally, Business Select and Rapid Rewards A-List Preferred flyers can check two bags for free.
Southwest Airlines Stock Movement Today
Southwest Airlines stock was up 0.21% on Monday, extending a 2.77% rally year-to-date and a 24.61% increase over the past 12 months. While customers may not be pleased with the baggage changes, investors are. That makes sense, as the baggage fees are expected to bring in $4 billion in profit for the airline.
Southwest Airlines could benefit from these products, as its earnings have been weighed down recently by its efforts to attract budget-minded customers. The changes to its baggage fees also line up with industry standards, providing it more revenue without putting too much pressure on passengers.
Is Southwest Airlines Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Southwest Airlines is Hold, based on five Buy, four Hold, and four Sell ratings over the past three months. With that comes an average LUV stock price target of $31.08, representing a potential 8.8% downside for the shares.
