Southwest Airlines rallied Thursday after the company lifted its revenue guidance and approved a $2.5 billion buyback plan. Airline stocks soared following the announcement.
Southwest Airlines announced a new financial plan and growth outlook Thursday ahead of its investor day presentation.
The company expects to deliver an estimated $500 million of run-rate cost savings in 2027 by minimizing hiring, optimizing scheduling, improving corporate efficiency and capitalizing on supply chain opportunities. Southwest is also pursuing opportunities to monetize the value of its fleet order book while modernizing and upgrading its planes. The airline hopes to reach an average fleet age of five years in 2031.
Southwest reported that its new fleet strategy aims to reduce average capital expenditures for aircraft to around $50 million through 2027. The company's board also approved a $2.5 billion share repurchase program.
"We're now ushering in a new era at Southwest, moving swiftly and deliberately to transform the company by elevating the customer experience, improving financial performance, and driving sustainable shareholder value," CEO Bob Jordan said.
New Targets, Assigned Seats
Southwest said it now sees Q3 revenue per available seat mile to be up 2% to 3% compared to last year. The company previously guided for up to a 2% decline in revenue per available seat mile.
Southwest expects fuel to be a bit cheaper, ranging from $2.50 to $2.60 per gallon. In its Q2 report, the airline expected $2.60 to $2.70 per gallon of fuel.
In addition to the new financial strategy, Southwest plans to implement a number of changes which it says will improve the customer experience. Southwest intends to boost demand through a new assigned-seating model, noting that 86% of airline passengers approved assigned seats.
Previously, Southwest passengers booked their tickets in groups, and then chose their seats on the plane as their batch boarded. The company expects to begin selling assigned seats in the second half of 2025, with the first flights under the new model starting in the first half of 2026.
Southwest is also offering new premium seating options with additional legroom to drive demand and generate more revenue per passenger. The airline will maintain its free bag policy and also implement other boarding upgrades.
Other new offerings include global airline partnerships to expand its global destinations, getaway vacation packages, and additional reward benefits for members.
Southwest Airlines Stock
LUV stock jumped 5.4% Thursday on strong volume, rebounding back above its 200-day moving average. Southwest spiked more than 10% in the morning.
Shares have been consolidating below a 35.18 buy point since February.
Southwest Airlines is up about 4% in 2024.
American Airlines also jumped 7.2% Thursday on the news.
United Airlines rallied 8.8% Thursday, climbing further above a buy zone for a double-bottom base.
Delta Air Lines surged 6.3% to trend toward a 53.86 buy point for a cup base.
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