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Southwest Airlines ( NYSE:LUV ) is ending its 54-year open seat policy and moving to assigned seats across its network.
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The airline is also introducing new fare classes, additional legroom options, and revised fare structures that change the way customers choose and pay for seats.
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These updates represent a significant reset of Southwest’s business model and the experience that has long defined the brand.
For investors, the change comes as Southwest trades at $47.52 and has returned 58.1% over the past year and 39.8% over the past 3 years. The stock is also up 13.3% over the past week and 15.1% over the past month and year to date, so the market has fresh expectations reflected in the price when the new model rolls out.
Assigned seating, extra legroom, and wider fare structures give Southwest new ways to segment demand and monetize the cabin, bringing it closer to how many peers operate it. The key questions now are how customers respond, how operations handle the shift, and how these changes will impact Southwest’s revenue mix and cost structure over time.
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How Southwest Airlines stacks up against its biggest competitors
For Southwest, moving to assigned seating, extra legroom and new fees sit at the top of the operating profile where 2025 revenue was US$28.1b and full-year net income was US$441m with a load factor of 77.4%. The new model is aimed at getting more revenue per seat from that network, and management is already guiding first-quarter 2026 operating revenue per available seat mile to be at least 9.5% higher year-over-year and capacity up 1% to 2%. It focuses more on how well these product changes translate to revenue quality rather than volume.
The assigned seat and basic economy rollout lines are closely aligned with existing narratives that emphasize differentiated pricing, product upgrades, and loyalty partnerships as key levers for margin improvement. Those stories also highlight distribution expansion and operational efficiencies, and plans for modest 2% to 3% capacity growth and cabin modifications in 2026 suggest management is trying to pull all those levers together rather than relying on traffic growth.
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The new fees on seats and bags, as well as extra legroom rows, give Southwest more tools to demand segment and potentially higher revenue per seat than peers like Delta Air Lines and United Airlines.
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Management is linking product changes with cost control and scalability enhancements, which could support improved earnings if implementation stays on track.
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Analysts have flagged uncertainty around bag charges and customer acceptance of basic economy, so there is a risk of pushback that could affect loyalty or load factor.
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The execution risk makes sense as the company overhauls a 54-year-old seat model while competing with carriers like American Airlines that already operate complex, fee-laden cabins.
