Southwest Airlines announces first airport lounges

Southwest Airlines on Wednesday announced plans to open its first-ever airport lounges, marking a significant step in the carrier's effort to attract higher-spending premium travelers and diversify its revenue streams.

The initial lounges will be located in Austin, Texas; Baltimore; Honolulu; and Nashville, Tennessee. Construction has already begun at those airports, with openings expected in late 2027, the airline said.

Partnership with Chase

Southwest is partnering with JPMorgan Chase on the lounge initiative, building on Chase's Sapphire Reserve Lounge Network. The airline said customers will be able to access the lounges with a new, premium Southwest Rapid Rewards credit card that Chase will issue. The card is slated to launch next year, though no details on pricing or fees were provided.

"Our lounges will be a natural extension of that experience, offering Customers a place to relax and experience the Southwest brand in a new way," Tony Roach, Southwest executive vice president, said in a statement. "The introduction of a lounge network represents a strategic investment in Rapid Rewards and deepens our 30-year partnership with Chase."

Expansion plans

Beyond the initial four locations, Southwest said it is planning to open seven more lounges over the next several years "across high-demand business and leisure markets."

CEO Bob Jordan has been signaling the airline's interest in lounges for months. He told CNBC in December that Southwest was "actively pursuing" a lounge network, adding, "I think lounges would be a huge, next benefit for our customers."

Competitive landscape

The move comes as airlines including Delta Air Lines and JetBlue Airways, along with credit card companies such as American Express, Capital One, and Chase, have been building airport lounges to attract and retain higher-spending consumers. Lounges offer travelers a quieter place to work or relax, complimentary food and drinks, and a more seamless airport experience, while helping airlines lock in customers, support premium fares, and drive spending on co-branded credit cards.

Broader strategy

Southwest has been working to shed its low-cost image and boost ancillary revenue through initiatives such as assigned seating and extra-legroom seats. The airline has been overhauling its business to better compete with network carriers following pressure from activist investor Elliott Investment Management and weaker profit margins after the pandemic.

Jordan signaled in May that Southwest could add more cabin options, including "true first class," and is likely over time to delve into long-haul international flying, though he said those ideas were still in development.

Jordan has previously acknowledged that the carrier loses customers to rivals because it does not serve destinations such as London or offer premium amenities, including airport lounges.

Airlines worldwide have been hit by a sharp rise in fuel prices stemming from the US-Israeli war in Iran, squeezing already thin margins. Carriers with a stronger suite of premium offerings are better positioned to weather the pressure, as they can lure travelers willing to pay more for higher-margin services such as premium seating, lounge access, and other upgrades.