Southwest Airlines (NYSE:LUV) CFO Tom Doxey said the carrier’s recent commercial initiatives have met or exceeded the company’s financial expectations, while demand remained strong into September and corporate revenue increased 30% year over year.
Speaking at an investor conference, Doxey said Southwest has focused on initiatives it can control, including assigned seating, extra-legroom seating, baggage fees, loyalty-program changes and the rollout of Starlink connectivity. He said the company expects roughly 300 aircraft to have Starlink installed by the end of the year, with additional installations planned next year.
Demand Holds Up Into Traditionally Softer Period
Southwest had previously said its third quarter was about 65% booked at the time of its second-quarter earnings report, with yields up 24% year over year. While Doxey did not update those figures, he said the demand environment has remained strong and September has exceeded the company’s expectations despite being a historically lower-demand month.
The carrier has limited visibility into the fourth quarter because booking curves remain relatively short, at roughly 60 days, he said. Still, Doxey said Southwest has not seen indications of decelerating demand heading into the holiday period.
Higher fuel prices have added costs, but Doxey said the company has been able to recover a substantial portion through higher revenue. If fuel remains elevated for a prolonged period, he said further revenue recovery would be needed. He added that airline pricing, even after recent unit-revenue increases, remains below 2019 levels on an inflation-adjusted basis compared with many other products.
Doxey said revenue strength has been sufficient to offset incremental fuel expense and allow Southwest to remain positioned to meet its third-quarter EPS guidance.
Initiatives Expected to Add Billions in EBIT
Doxey said assigned seating and extra-legroom products are expected to generate more than $1 billion in EBIT in 2026 and about $1.5 billion in 2027, when the initiatives will have a full-year contribution. Baggage-related initiatives are also expected to contribute $1 billion in EBIT this year, he said.
Those company-specific gains are being added to broader industry revenue improvement and recovery from higher fuel costs, as well as incremental loyalty revenue from Southwest’s amended agreement with Chase.
Southwest has also seen a greater share of customers purchasing ancillary products. Doxey said the percentage had risen from less than 20% historically to about 60%, although he declined to establish a specific target. Instead, he said the company aims to expand products that encourage customers to buy higher-value offerings.
- Assigned seating and extra-legroom seats are expected to produce more than $1 billion in 2026 EBIT and approximately $1.5 billion in 2027 EBIT.
- Baggage initiatives are expected to be worth $1 billion in EBIT this year.
- Corporate revenue has risen 30% year over year, according to Doxey.
Lounges, Premium Card and Corporate Opportunity
Southwest recently announced plans for airport lounges in partnership with Chase. Doxey said the companies have announced four locations and described the plan as “4+7,” with additional sites likely to be considered. He did not identify the locations during the discussion.
The lounge initiative is intended to support a future premium credit-card offering, attract higher-spending customers and create an aspirational “halo” for the carrier’s loyalty program, Doxey said. Construction has begun at some locations, and he said the lounges are expected to be accretive to the business.
Doxey also said Southwest is evaluating international long-haul service but has not made a decision on whether it will become part of the airline’s offering.
On corporate travel, Doxey said Southwest “punch[es] above our weight” but sees further opportunity as assigned seats, expanded distribution and lounge access mature. He said the carrier had been more exposed to shorter-haul corporate day trips, a segment more affected by post-pandemic travel changes, while new product features could improve its position in longer-haul business travel.
Fleet, Costs and Operations
Doxey said Southwest expects deliveries of some Boeing 737 MAX 7 aircraft around year-end, with the aircraft entering service early next year. The company has 27 MAX 7s already built and in storage, he said, and is working with Boeing to bring them to the current specification.
The MAX 7, which Doxey described as a roughly 150-seat aircraft, will provide a middle-ground option between Southwest’s retiring 737-700s and larger MAX 8s. He said it could be especially useful at airports with shorter runways while offering better fuel efficiency and more seats than older aircraft.
Southwest has reduced its planned 2026 year-over-year capacity growth from roughly 2% to 3% by about half in response to higher fuel costs, Doxey said. He also said the company expects its companywide focus on efficiency to continue into 2027, following hundreds of millions of dollars in identified cost savings incorporated into its 2026 outlook.
On operations, Doxey said Southwest ranked first in the Wall Street Journal’s airline rankings last year and was trending first so far this year. He attributed that performance to investments in technology, equipment, processes and operational decision-making, rather than chance.
About Southwest Airlines (NYSE:LUV)
Southwest Airlines Co is a major U.S. passenger airline headquartered in Dallas, Texas. Operating under the Southwest Airlines brand, the company provides scheduled air transportation for domestic and international travelers and also offers air cargo services.
Southwest was founded in 1967 and began commercial service in 1971, initially connecting Dallas, Houston and San Antonio. The airline expanded its network across the United States and now serves numerous destinations in the United States, Mexico, the Caribbean, Central America and other nearby international markets.
