Southwest Airlines Checked Baggage Free No More? "Never Say Never" Says CEO

The CEO of budget flight provider Southwest Airlines hinted that the company might end their long-standing policy of free checked baggage, after dismal fourth quarter earnings.

"There are no plans to charge for bags in 2013," said Gary Kelly to CNBC. But the airline executive added, "Never say never, the customers will tell us whether they would prefer to have extra fees or whether they would prefer to have everything bundled."

Southwest is looking for ways to cut costs after a poor earnings report released Thursday.

"Results at Southwest Airlines were also affected by a decline in passenger numbers. The budget airline said Thursday fourth-quarter earnings fell 49% as it booked lower fuel-hedging gains, higher operating expenses and weakening traffic," wrote the Wall Street Journal.

Several issues are at work in Southwest's poor showing.

"Kelly added that the industry is facing pressure due to higher fuel costs, which weighed on fourth-quarter profits. Southwest did earn $0.09 a share, excluding one-time items, a penny higher than estimates. Revenue of $4.2 billion was just shy expectations. It also saw higher operating expenses and a decline in passenger traffic," said CNBC.

Kelly also blames efforts by the larger, older airline companies to get their costs down.

"Every single legacy carrier has gone through bankruptcy. Gotten their costs down significantly," he said.

One of those legacy carriers, United Continental, also posted low earnings on Thursday. Overall, airline ticket sales are down, as the sluggish recovery has passengers turning to cheaper modes of transportation or cutting back on travel and vacations.

But Kelly says he remains hopeful for the coming year.

"As we enter 2013, bookings and revenue trends, thus far, suggest a year-over-year improvement in January 2013 passenger unit revenues in the two to three percent range," he said. "While the effect of U.S. tax increases on the domestic economy remains uncertain, bookings for the remainder of first quarter, thus far, are strong."