Fitch Ratings downgraded Southwest Airlines' outlook to negative on April 3, 2025, while affirming its long-term Issuer Default Rating (IDR) at 'BBB+'. The downgrade reflects concerns over the airline's lack of progress towards margin improvement and higher capital deployment.
Fitch specifically noted that Southwest's recent decision to introduce baggage fees, a departure from its long-standing customer-friendly policies, could risk eroding its competitive strength relative to its peers. This change is seen as a potential factor impacting customer loyalty.
The credit rating agency's assessment highlights the financial pressures Southwest faces as it implements its transformational plan. A negative outlook indicates a higher probability of a rating downgrade if the company does not demonstrate improved financial performance and strategic execution.
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