There is more to "bags fly free" then just bag fees. Our customers know that they can check bags for free and do so. On full flights, we rarely tag bags, and when we do it is usually only a hand full. By comparison, I commute on USAirways about 3 times a month. The flights are always full, and since passengers don't want to pony up for the bag fee, almost everyone has a roller bag. Is is not uncommon for the jetway to look like a luggage warehouse by the time boarding is completed.
With the SWA business plan, our 20-25 minute turns would be impossible with so many gate checked bags. If we had to do 50 minute turns everywhere we went in order to accommodate carry on bags (that become free checked bags) we would lower aircraft utilization. Gary Kelly stated a couple months ago that getting an extra flight or three by keeping an airplane in the air will outweigh the extra bag revenue.