Southwest’s Evolution: Assigned Seating, Redeye Flights, Premium Upgrades

Courting business travelers and younger generations, Southwest Airlines will introduce assigned and premium seating in 2026, a change it says will give its revenue a $1.5 billion boost and hopefully return the airline on a path of profitability.

But Southwest isn’t touching one of its sacred cows: zero bag fees.

New Plan: “Southwest. Even Better”

Southwest executives unveiled the plan, branded “Southwest. Even Better,” at an investor day on Thursday.

Photo: Courtesy of Stephen Keller / Southwest Airlines

The airline is trying to head off a coup from activist investor Elliott Investment Management, which took an 11 percent stake in the company in June. The hedge fund is pushing for major changes to restore Southwest’s once industry-leading profits and wants to unseat CEO Bob Jordan and two-thirds of the board.

Southwest has had a turbulent few years. Its record of 47 straight years of profitability faltered during the pandemic, and the airline has struggled to return to its former form, even amidst a travel boom.

A meltdown during the 2022 holiday season drew disastrous headlines and a historic $140 million fine from the Department of Transportation (DOT). Passenger volumes are still below 2019 levels, and Southwest’s stock has lost around 40 percent of its value since 2021.

Photo: Bob Jordan, CEO at Southwest Airlines. Courtesy of Maria Nieto, Southwest Airlines, 2024

Jordan says the airline is now making the changes it needs.

Southwest is “moving swiftly and deliberately to transform the Company by elevating the customer experience, improving financial performance, and driving sustainable shareholder value,” he said.

No More Free Seating

The biggest change travelers will notice is the end of Southwest’s iconic free-for-all seating policy. Beginning on flights in the first half of 2026, Southwest passengers will be assigned a seat and not have to grab one as they board.

Photo: Southwest Airlines New Cabin Interior. Courtesy of Stephen Keller / Southwest Airlines

The airline said it’s responding to customer preference. Its research found that 80 percent of its customers—and 86 percent of those flying with a competitor—want assigned seats. It also noted that it’s flying longer flights, on which seat preference is even more important for passengers.

Southwest will also introduce four tiers of tickets, including a premium seat with extra legroom that Southwest says will appeal to business travelers. Around a third of the airline’s fleet will be outfitted with premium seats, a retrofit project starting early next year and concluding before the end of 2026.

Photo: Southwest Airlines New Cabin Interior. Courtesy of Stephen Keller / Southwest Airlines

But to accommodate the premium seats’ five extra inches of pitch, Southwest will have to ditch a row of seats on some aircraft and, it admitted, shave one inch from legroom for economy seats on some planes.

Photo: Courtesy of Stephen Keller / Southwest Airlines

A standard 31-inch legroom for economy tickets will still put Southwest at a level with major competitors. And for loyalists afraid of being stuck in the back, Southwest will hand out some premium seats as perks to A-List and A-List Preferred passengers under its revamped Rapid Rewards loyalty program.

Hello Redeye Flights

In another shift that will appeal to business travelers, Southwest will introduce redeye flights, with the first launching in February.

Photo: Courtesy of Southwest Airlines / Stephen M. Keller

The airline says overnight flights unlock revenue by increasing aircraft utilization daily, enabling passengers to connect onward through Southwest’s network. It highlighted an overnight route between Honolulu (HNL) and Las Vegas (LAS), which is forecast to draw in 50 percent more connecting passengers than daytime departures when it launches in April.

New Partnership with Icelandair

That network has more reach than ever before, as Southwest makes its first partnership with an international airline with low-cost carrier Icelandair. The airlines will partner to connect Baltimore (BWI) and Reykjavik (RKV) and, from there, expand to other U.S. cities.

Photo: Icelandair, Airbus A321neo. Courtesy of Airbus

The link will “expand its network and connect customers with more global destinations to generate additional demand for travel across the Southwest network,” Southwest said.

Southwest is discussing with other transatlantic and transpacific airlines and expects to announce another partnership next year.

With these transformations, Southwest hopes to boost its pre-tax earnings by $1.5 billion in 2027.

Free Bags Are Here To Stay

However, one part of the Southwest’s unique culture that it won’t ditch is free luggage. Passengers will still be able to check two bags for free, a perk that Southwest says sets it apart from rivals.

Those competitors reaped $7 billion in revenue from bag fees last year alone. But Southwest insists the gains it could see from bag fees—estimated at $1.5 billion a year—would be eclipsed by a projected loss of $1.8 billion from disgruntled, luggage-toting travelers choosing another airline.

Photo: Courtesy of Stephen Keller / Southwest Airlines

However, Elliott dismissed Southwest’s overhaul as too little, too late. “Another promise of a better tomorrow from the same people who have created the problems we face today,” the hedge fund said in a statement.

“Without credible leadership that can execute, this plan—filled with long-dated promises of better performance—risks becoming the latest in Southwest’s long series of failed improvement initiatives.”

Atlanta Sees Major Cuts

Meanwhile, some changes at Southwest are painful. On Wednesday, the airline announced to staff that it would scale back its operation in Atlanta (ATL) starting in April and asked hundreds of employees to relocate. It says it’s responding to a change in business travel patterns post-pandemic.

Observers say Southwest needs to cut even more flights, as the domestic aviation market is over capacity.