(Bloomberg) -- The fate of Southwest Airlines Co.’s popular “bags fly free” policy is likely to be among the most contentious issues to be broached as activist firm Elliott Investment Management pushes for changes after taking a $1.9 billion stake in the carrier. 

Southwest is alone among US carriers in letting passengers check two bags at no cost, giving up the potential for millions in revenue in exchange for a service that sets it apart from rivals. While the carrier recently opened the door to evaluating other changes to its long-held business model, like assigned seating or some sort of premium product, it’s remained steadfast that bag fees aren’t part of the review. 

Elliott appears to have a different view, noting in a website presentation that Southwest has “written off” revenue opportunities implemented across the industry over the past 15 years, including assigned seating, premium products, a bare bones basic economy fare and checked bag fees. Carriers globally collected $33.3 billion in baggage fees last year, up nearly 15% from 2023, according to an annual study by IdeaWorks and CarTrawler. 

But rushing to change too much at Southwest, the US carrier that has held most tightly to its culture and quirky differences, could turn away long-time loyal customers. Such a change could be “traumatic” to Southwest’s customers, culture and employees, said Jay Sorensen, president of IdeaWorks. 

“It is a stunning distinction because no one else is doing this,” he said in an interview. “How many times do you get that opportunity in life as a marketer? This is something that is to be preserved, perhaps at all costs.” 

Southwest does charge for a third or more checked bags, and those that are oversized and overweight, collecting $73 million last year. American Airlines Group Inc. took in nearly $1.4 billion, according to the US Transportation Department, while United Airlines Holdings Inc. had $1.2 billion. Among airlines that only serve the domestic market, Spirit Airlines Inc. collected $988 million and Frontier Group Holdings Inc., $880 million.

Still, Southwest Chief Executive Officer Bob Jordan repeated the company’s stance on a quarterly conference call in April — “The reason we’re not considering bag fees is because people choose Southwest Airlines because we don’t have bag fees.” He cited a J.D. Power survey he said showed more than 60% of people named free bags as the top reason they chose to fly on Southwest. 

In 2013, then-CEO Gary Kelly estimated the carrier was gaining about $1 billion in revenue annually by winning over customers with its bag policy.

“I can’t imagine that they’d give up on it,” Conor Cunningham, a Melius Research analyst, said of the free bags. “It’s so ingrained in the culture.” 

Free bags are part of Southwest’s “value proposition and something customers know they are getting when they travel with us,” the carrier said in an emailed statement Tuesday.

The revenue potential at Southwest, which carries the most passengers in the domestic market each year, may make a change too hard to resist. Other options could include dropping the number of free bags to one, requiring passengers to hold the company’s credit card to get two at no charge or reducing fees if the traveler buys another product like an assigned seat. 

“I don’t think Southwest can dismiss not charging for bags anymore, not when you have an activist investor sitting on $1.9 billion of your stock,” said Henry Harteveldt, a travel industry analyst and founder of Atmosphere Research Group. “There are going to be decisions that Elliott may force on the airline, with Southwest holding its nose. You cannot ignore that shareholder.” 

(Updates with Southwest comment in tenth paragraph.)

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