A Southwest Airlines Boeing 737 airplane arrives at Los Angeles International Airport from San Francisco on March 28, 2025 in Los Angeles, California.
Kevin Carter | Getty Images News | Getty Images
Despite a 42% drop in profit during the first nine months of 2025 compared to 2024, Southwest Airlines stock is soaring, and investors are taking notice.
Shares of the Dallas-based carrier are up nearly 24% year-to-date, outpacing all other major U.S. airlines. For comparison, Delta Air Lines and United Airlines have each seen gains of around 17% this year.
Southwest’s stock recently hit a two-and-a-half-year high, fueled by optimism surrounding the airline’s ongoing transformation. The company is shifting away from its traditionally standardized approach to better compete with larger rivals.
“What’s helping Southwest’s stock is clearly the initiatives, not the [demand] environment, because if it was you’d see it in all the other stocks as well,” explained Savanthi Syth, an airline analyst at Raymond James.
Southwest Airlines stock compared with the NYSE Arca Airline index
Beginning January 27, Southwest is eliminating its long-standing open seating policy in favor of assigned seats on all of its Boeing 737 aircraft. Rows with extra legroom will be available for an additional fee. Seat prices vary, with a Baltimore to Las Vegas flight in early February showing prices around $80 each way.
Southwest forecasts that assigned seating and extra legroom options could generate $1 billion in pre-tax earnings next year and $1.5 billion in 2027.
“Because the assigned seating, the extra legroom, kicks in and there’s a lot of value in that, of course, [results are] going to be better year over year,” Southwest CEO Bob Jordan stated on December 10. “The bookings that we’re seeing reflect the business case for assigned seating and extra legroom.”
Earlier this month, Barclays upgraded Southwest’s stock, with transportation analyst Brandon Oglenski predicting adjusted earnings exceeding $4 per share next year and surpassing $6 per share in 2027.
The shift away from the “cattle call” boarding process follows Southwest’s decision earlier this year to eliminate another long-held perk: two free checked bags. The airline also introduced its first-ever basic economy fares.
Like other airlines, Southwest lowered its 2025 profit forecast after demand softened earlier in the year, impacted by tariffs imposed by President Donald Trump and cost-cutting measures in Washington. A recent government shutdown also dampened demand, prompting Southwest to revise its earnings outlook downward.
Southwest typically releases its annual outlook alongside its fourth-quarter earnings report in late January.
