11:33 AM EDT, 03/11/2025 (MT Newswires) -- Southwest Airlines ( LUV ) on Tuesday lowered its first-quarter outlook for a key revenue metric and announced a policy change to begin charging certain customers for checked bags.

The company now sees revenue per available seat mile, or RASM, rising 2% to 4% year over year in the ongoing three-month period, down from its prior growth range of 5% to 7%. It expects capacity, as measured by available seat miles, or ASMs, to decline 2% in the quarter, compared with the prior expectation for the metric to fall 2% to 3%.

The softer revenue guidance primarily reflects a higher-than-expected completion factor, less government travel, and a bigger impact from the California wildfires than originally estimated, according to a filing with the Securities and Exchange Commission. The decrease also incorporates "softness in bookings and demand trends as the macro environment has weakened," it said.

Shares of the airline jumped 6% in Tuesday trading.

Southwest ( LUV ) tweaked its fuel cost estimate for the quarter to a range of $2.35 to $2.45, down from $2.50 and $2.60 previously. It also reduced its growth estimate for operating expenses per available seat mile, excluding fuel and oil expense, special items, and profit sharing, known as CASM-X, to 6%, compared with an earlier growth rate of 7% to 9%.

Southwest ( LUV ) separately announced that it will begin charging non-royalty members for checked bags, breaking away from its policy that bags fly free for everyone, which included two free checked bags. Rapid Rewards A-list preferred members and customers traveling on business select fares will continue to receive two free checked bags, while A-list members and other select customers will be able to check one bag for free. The new policy goes into effect for flights booked on or after May 28.

In September 2024, Southwest ( LUV ) said its research indicated that any change in bags fly free policy would "drive down demand and far outweigh any revenue gains created by imposing and collecting bag fees."

On Tuesday, Chief Executive Bob Jordan said Southwest ( LUV ) has "tremendous opportunity to meet current and future customer needs, attract new customer segments we don't compete for today, and return to the levels of profitability that both we and our shareholders expect."

On Monday, Delta Air Lines ( DAL ) lowered its year-over-year first-quarter revenue growth forecast to between 3% and 4% from an earlier 7% and 9%. It cut its earnings per share target to a range of $0.30 to $0.50 from between $0.70 and $1 previously. Shares of Delta tumbled 6.5% in Tuesday trade.

In a regulatory filing, Delta said the outlook was "impacted by the recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in domestic demand."

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