A Southwest Airlines Boeing 737-700 lands at Ronald Reagan Washington National Airport in Arlington, Virginia, on May 7, 2023.
Nicholas Economou | Null Photo | Getty Images
Dallas — southwest airlines Executives outlined to Wall Street on Thursday a vision for boosting profits starting in 2026, including the introduction of extra legroom, reserved seats, international partnerships and overnight flights. Southwest Airlines’ new plan comes as the airline’s leaders try to fend off activist Elliott Investment Management, which is calling for a change in leadership.
Southwest Airlines announced that its three-year plan will result in a $4 billion increase in profit before interest and taxes in 2027.
The company also raised its third-quarter revenue forecast and announced that its board of directors has approved a $2.5 billion share buyback.
Southwest Airlines said it expects third-quarter unit revenue to increase by up to 3% year-over-year, ahead of previous expectations of a decline of up to 2% year-over-year, due in part to passengers rebooking their original plans. Ta. Airlines affected by July’s CrowdStrike failure.
Southwest Airlines stock rose more than 5% on Thursday, with other airlines also closing significantly higher as oil prices fell nearly 3%.
sky change
Like many changes in the airline industry, these new initiatives won’t happen overnight. Southwest needs to train its staff, update its technology and inform customers about the changes.
The extra-legroom seats won’t debut until 2026, according to slides from Thursday’s investor presentation, as the company needs time to get Federal Aviation Administration approvals and retrofit the planes. The new cabin, which adds legroom to about a third of the seats, is estimated to generate $1.7 billion in revenue before interest and taxes in 2027.
The airline says the new seats will have at least 34 inches of legroom, compared to the standard pitch of 31 inches.
Southwest Airlines was under pressure to do away with its open-seat model and often confusing boarding process. Under the new plan, the cheapest ticket class, “Wanna Get Away,” will not be assigned a seat until check-in, similar to the current system. More expensive tickets mean more seat access, but Southwest Airlines did not provide details of that process Thursday.
“When you look at lapsed customers, the seats and the boarding process are the number one reason they don’t return to Southwest Airlines,” said Ryan Green, Southwest Airlines’ chief commercial officer. “We were struck by how clear the message was: evolving the model to better meet customer preferences is imperative.”
Southwest Airlines also announced its first international partnership with Icelandair.
the bag is still flying free
Southwest Airlines also announced Thursday that it would stick to its long-standing policy of allowing customers to check two bags for free, saying it would “generate market share gains that outweigh the potential revenue loss from baggage fees.” Southwest Airlines executives have characterized the elimination of free checked bags as a third rail that hurts bookings.
Telecommunications carriers are also trying to cut costs. Southwest Airlines on Wednesday told employees it would cut service in Atlanta next year and potentially eliminate more than 300 flight attendants and pilots from the city to cut costs.
The company also announced Thursday the addition of Bob Fornaro, a respected industry veteran who previously led the company. spirit airlinesto the Board of Directors. Southwest and Fornaro’s history goes back more than a decade. He was the CEO of AirTran, the airline that merged with Southwest Airlines in 2011, and served as a consultant to Southwest Airlines after the merger.
under pressure
Southwest Airlines flight attendant uniform from the 1990s.
Provided by: Southwest Airlines
The Dallas-based airline has enjoyed nearly half a century of profits in an industry known for booms and busts. We stuck to a simple business model: flying. boeing The 737 provides a single class of service and avoids complexity that can increase cost. The airline boasts customer-friendly policies such as free checked bags and didn’t charge customers for flight changes long before major airlines eliminated change fees on most tickets four years ago.
But in the post-pandemic years, as costs rise, global travel returns, and competitors turn up the heat on upscale offerings like luxury lounges and spacious seating, Pressure is mounting on Southwest Airlines CEO Bob Jordan and other executives. A big spender. Over the past decade, U.S. competitors have added bare-bones basic economy fares and started charging for things that were previously free, such as seat selection.
Southwest Airlines is also changing, offering longer-haul flights, including to Hawaii, and customers demanding more perks, comfort and technology, airline executives said.


Southwest Airlines has supported Mr. Jordan despite calls to replace Mr. Elliott, and the airline reiterated that after Thursday’s investor day presentation.
Mr. Elliott said in a statement that Thursday’s announcement was “further evidence that Mr. Jordan lacks the vision and ability to execute on these initiatives,” and that his competitors could complete development of reserved seats and premium products more quickly. said. Jordan delayed the timing because its rivals have been working on updating their cabins for years.
Jordan said in an investor presentation that he was open to working with Elliott, which owns about 10% of the airline. Elliott said Tuesday that the company could hold an extraordinary general meeting as early as next week.
“Time and time again, Elliott has shown little or no willingness to work with Southwest on how to deliver more shareholder value, although we have demonstrated that willingness time and time again through our own endeavors and engagement.” “We have not been concerned, but rather focused, as evidenced by recent letters and reports on recent actions, tactics and gamesmanship,” Jordan said. He argued that Southwest’s plan is intentional and detailed.
“In my opinion, it’s insane for Elliott to call his plans hasty and haphazard.”
The airline is facing aircraft delivery delays due to: boeingincludes the family’s smallest aircraft, the 737 Max 7, which has not yet been certified. Southwest Airlines cut unprofitable routes that, without the smaller aircraft, might have been better off using fewer-seat aircraft to meet demand.
“We have taken dramatic steps to reduce operational risk from future Boeing delays by significantly curtailing growth and suspending hiring,” Jordan said at an event Thursday, adding that the company has taken drastic steps to reduce operational risk from future Boeing delays by 2026. He added that all of the company’s growth through 2020 will come from efficiency improvements such as turning aircraft around. For faster or red-eye flights.
“Past financial problems caused by Boeing delivery delays and other Boeing issues have been largely resolved by applying credits to future deliveries,” he said.
— CNBC’s Rohan Goswami contributed to this report.