A Southwest Airlines Boeing 737 landed at Los Angeles International Airport on March 28, 2025, after arriving from San Francisco, highlighting a notable phase for the airline as it navigates financial challenges and operational changes.
Despite a steep 42% decline in profit during the first nine months of the year compared to the same period in 2024, Southwest’s stock has soared, experiencing an increase of nearly 24% in 2025, outperforming other U.S. passenger carriers. In contrast, major competitors Delta Air Lines and United Airlines have seen stock rises of approximately 17% each year. Recently, Southwest’s shares hit a new 2½-year peak, suggesting positive investor sentiment arises from the airline’s strategic initiatives rather than the broader demand environment.
Analysts, such as Savanthi Syth from Raymond James, attribute the stock’s performance to Southwest’s efforts to revamp its operations, moving away from a uniform service model to one that closely resembles that of larger rivals. Starting January 27, the airline will discontinue its traditional open seating policy and introduce assigned seating across its all-Boeing 737 fleet. The airline also plans to offer seats with extra legroom for a fee, with early pricing examples showing costs approaching $80 for select routes.
Southwest’s leadership anticipates significant financial benefits from these changes, forecasting a potential $1 billion in pretax earnings driven by assigned seating and extra legroom seats in the upcoming year, and even higher projections of $1.5 billion by 2027. CEO Bob Jordan emphasized that early booking data supports this optimistic outlook.
Additionally, recent changes have included the elimination of complimentary checked baggage and the introduction of basic economy fares, aligning the airline with industry trends. These moves come in response to fluctuating demand levels influenced by geopolitical decisions, including presidential tariffs and budget cuts in Washington, compounded by the effects of a recent government shutdown that negatively affected travel demand.
Southwest is expected to provide a comprehensive yearly outlook in late January, coinciding with the release of the previous year’s earnings report. This upcoming announcement will likely clarify the airline’s strategies moving forward and how it plans to balance operational shifts with profitability in a competitive and ever-evolving market.
