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Southwest Airlines Soars with Bold New Strategy, Foresees Sky-High Profits in 2026
Dallas, TX – Southwest Airlines is charting a new course, projecting a significant surge in 2026 profits that has analysts buzzing. The airline, known for its distinct approach to air travel, is actively overhauling its half-century-old business model, introducing new revenue streams like assigned seating and – for the first time ever – bag fees, to bolster its bottom line.
On Wednesday, the carrier announced an expected adjusted earning of at least $4 per share this year, comfortably surpassing the $3.19 analysts had anticipated, according to LSEG estimates. Furthermore, Southwest anticipates capacity growth of 2% to 3% compared to 2025, a figure that could nearly double last year’s expansion.
CFO Tom Doxey noted in an interview Wednesday that the airline is allowing for “a little more time before we gave the upper bound of this forecast just to let a little more information come in” regarding the new initiatives, emphasizing strong travel demand. Following the announcement, Southwest stock climbed over 5% in post-market trading.
For the first quarter, Southwest expects revenue per seat mile to increase by 9.5%, exceeding analysts’ projection of 8.5%. The carrier also forecast adjusted earnings of 45 cents for the first quarter, outperforming Wall Street’s 33-cent projection.
“Notwithstanding the impact of Winter Storm Fern, 2026 is off to a strong start, driven by the Company’s Customer-focused product offering, operational excellence, and dramatic progress from the transformational initiatives implemented last year,” stated CEO Bob Jordan in an earnings release. The recent winter storm caused widespread flight cancellations across the industry, with some competitors facing particular struggles in recovery.
Here’s a snapshot of Southwest’s fourth-quarter performance against Wall Street expectations, based on LSEG consensus estimates:
- Earnings per share: 58 cents adjusted vs. 58 cents expected
- Revenue: $7.44 billion vs. $7.51 billion expected
Southwest has dedicated the past two years to implementing significant changes to its business model. This week marks a notable shift, as the airline replaces its long-standing open boarding policy with assigned seating, a practice in place for 54 years. These new seat assignments come with upcharges for premium locations, including a new extra legroom section.
Last year, the airline introduced charges for checked bags and launched basic economy fares, marking a departure from its historical policies. These moves align Southwest more closely with its industry rivals as it navigates pressure to enhance profitability.
“We’re not done,” Doxey affirmed on Wednesday regarding the airline’s ongoing initiatives. Executives have previously hinted at further ventures, with Jordan mentioning in a recent interview that Southwest is exploring the possibility of airport lounges.
Southwest executives are scheduled to address investors on Thursday morning, where they are expected to field questions concerning the cost of the recent storm, new revenue streams, and future profit growth beyond the initial impact of these new offerings.
In the fourth quarter, Southwest’s net income saw a nearly 24% increase from the previous year, reaching $323 million. Revenue also climbed by 7.4% to $7.44 billion. After adjusting for one-time items, including a reorganization, Southwest reported earnings of $301 million, or 58 cents per share, compared to $356 million, or 56 cents per share, a year earlier.