Prime Highlights:
- Southwest Airlines expects adjusted earnings of at least $4 per share in 2026, exceeding analyst forecasts.
- The airline is boosting revenue through new initiatives like assigned seating and bag fees, signaling a major shift in its business model.
Key Facts:
- Fourth-quarter net income rose 24% year-on-year to $323 million, with adjusted earnings of 58 cents per share.
- Southwest plans capacity growth of 2% to 3% in 2026, almost double last year’s expansion, showing confidence in travel demand.
Background:
Southwest Airlines is forecasting a significant surge in profits for 2026, driven by strategic changes to its decades-old business model, including new revenue streams such as assigned seating and baggage fees. The airline anticipates adjusted earnings of at least $4 per share this year, surpassing analyst expectations of $3.19 per share, according to estimates from LSEG.
The airline also plans capacity growth of 2% to 3% compared with 2025, nearly doubling last year’s expansion. Despite challenges from Winter Storm Fern, which disrupted flights across the U.S., Southwest’s leadership highlighted strong travel demand as a key factor in the company’s positive outlook.
Chief Financial Officer Tom Doxey noted in an interview that the company is carefully monitoring the results of its new initiatives before finalizing the upper range of its forecast. “We wanted to give a little more time before we gave the upper bound of this forecast just to let a little more information come in,” he said.
Southwest has made a series of bold changes in recent years. After 54 years of open seating, the airline introduced assigned seats this week, including upcharges for premium spots such as extra legroom sections. Last year, the airline also began charging for checked bags for the first time and launched basic economy fares. These moves align Southwest more closely with its competitors while creating new sources of revenue.
In the fourth quarter, Southwest reported net income of $323 million, up nearly 24% from the previous year. Adjusted earnings came to 58 cents per share, matching Wall Street expectations, while revenue rose 7.4% to $7.44 billion.
The airline is also looking at new opportunities, including the possibility of opening airport lounges. CEO Bob Jordan said the company’s strong performance reflects both good operations and the early results of recent changes.
Investors reacted positively, sending Southwest shares up more than 5% after the market closed. Executives will discuss the company’s growth plans, new revenue streams, and the effects of recent weather disruptions in an upcoming investor call.
With these changes, Southwest Airlines is aiming for higher profits and steady growth in the competitive U.S. airline market.
