A Southwest Airlines plane parks at gate B33 while its tail is exposed to the sun at Boston Logan International Airport in Boston, Massachusetts, December 22, 2025.
Austin De Sisto | Nuphoto | Getty Images
Southwest Airlines On Wednesday, it forecast profit growth in 2026 well above analyst expectations, as the carrier overhauls its half-century-old business model to include new revenue sources like baggage fees and seat assignments.
The airline expects to earn at least $4 per share adjusted this year, exceeding the $3.19 expected by analysts, according to LSEG estimates. It also projects capacity growth of 2-3% from 2025, which could almost double last year’s capacity expansion.
“We wanted to give a little more time before giving the upper bound on that forecast, just to let a little more information in” about the new initiatives, Chief Financial Officer Tom Doxey said in an interview Wednesday. He said demand for travel was strong.
Shares of Southwest rose more than 5% in post-market trading after the company’s report.
In the first quarter, Southwest said it expects revenue per seat mile to increase 9.5%, above the 8.5% expected by analysts. The carrier forecast adjusted profit of 45 cents for the first quarter, higher than the 33 cents forecast by Wall Street.
“Despite the impact of Winter Storm Fern, 2026 is off to a strong start, driven by the company’s customer-focused product offering, operational excellence and dramatic progress on transformation initiatives implemented last year,” CEO Bob Jordan said in an earnings release. The sprawling winter storm forced airlines to cancel thousands of flights, although Southwest Texas rival American airlines has particularly struggled to recover from weather impacts.
Here’s how the company performed in the fourth quarter compared to Wall Street expectations, according to LSEG consensus estimates:
- Earnings per share: 58 cents adjusted versus 58 cents expected
- Income: $7.44 billion versus $7.51 billion expected
Southwest has spent much of the past two years making sweeping changes to its business model, including ending its open boarding policy and moving this week to assigned seating, which comes with extra fees for some seats, including its new extra legroom section.
Last year, the airline started charging customers to check bags for the first time ever and launched basic economy fares. These policies allow the long-standing industry to further differentiate itself from competitors, as the airline faces pressure to improve profits.
“We’re not done,” Doxey said Wednesday of the airline’s initiatives. Carrier executives have already discussed the possibility of other projects. Jordan said in an interview last month that Southwest was exploring airport lounges.
Southwest executives are expected to answer questions from investors on a call Thursday morning about the cost of the storm, new revenue streams and profit growth in coming years beyond the peak sales seen during their debut.
Southwest’s fourth-quarter net income rose nearly 24% from a year earlier to $323 million, while revenue rose 7.4% to $7.44 billion. After adjusting for one-time items, including a reorganization, Southwest posted a profit of $301 million, or 58 cents per share, compared with $356 million, or 56 cents per share, a year earlier.