Southwest Airlines today hosted its Investor Day briefing in Dallas, where company leaders unveiled an ambitious three-year plan designed to elevate the airline’s unique business model and deliver an even better Southwest experience.

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This comprehensive plan aims to transform the customer experience by offering more choices and enhanced comfort, all while driving revenue growth and returning to industry-leading profitability.

Transforming the Product to Meet Customer Preferences

The heart of Southwest’s transformation is a customer-centric approach guided by data-driven research. The airline is evolving to meet changing traveler needs while preserving the aspects that make it stand out among competitors.

• Assigned Seating: Southwest is moving to an assigned seating model, appealing to a broader customer base. Research shows that 80% of Southwest customers and 86% of travelers with other airlines prefer assigned seating, especially on longer flights. The assigned seating model will be introduced for sale in the second half of 2025, with flights featuring this new option beginning in the first half of 2026.

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• Premium Seating: Responding to traveler demand, Southwest will offer premium seating options with up to five additional inches of legroom on roughly a third of its seats, all while maintaining a competitive economy seat pitch. This move is expected to attract more customers and generate additional revenue.
• Southwest Boarding with Upgrades: Even with seat assignments, Southwest’s signature boarding process will remain. Customers will still board using position numbers and signage, with the most loyal and premium passengers boarding first, ensuring a smooth and efficient process.
• Bags Continue to Fly Free: Southwest’s iconic “bags fly free” policy will remain unchanged, reinforcing one of the key features that sets the airline apart from its competitors. Research confirms that any changes to this policy would reduce demand, making it a core element of the Southwest experience.

Operational Efficiencies to Fuel Growth

To support its growth over the next three years, Southwest is implementing key operational improvements:

• 24-Hour Operations: Starting in February 2025, Southwest will introduce redeye flights in key markets, enhancing aircraft utilization.
• Turn Times Between Flights: The airline is working to reduce the time it takes to turn an aircraft, boosting productivity and making life easier for employees.

Southwest’s Financial Plan

• Cost Discipline: Southwest aims to achieve an estimated $500 million in annual cost savings by 2027 through efficient hiring, optimized scheduling, supply chain opportunities, and corporate efficiency.
• Strategic Fleet Management: Southwest is modernizing its fleet to achieve an average fleet age of just five years by 2031, reducing average capital expenditures on aircraft to approximately $500 million through 2027.
• Prudent Capital Deployment: The airline is balancing its capital expenditures, investing in operational infrastructure, managing debt, and rewarding shareholders with dividends and share repurchases. The Board of Directors has approved a $2.5 billion share repurchase program, demonstrating confidence in Southwest’s strategic plan and revenue-generating initiatives.

Financial Targets

Southwest’s three-year financial plan aims to achieve approximately $4 billion in cumulative incremental EBIT contribution by 2027, with a targeted Return on Invested Capital (ROIC) of 15% or greater, significantly exceeding the Weighted Average Cost of Capital (WACC).