A dramatic jump in passengers paying for seat selection add-ons shows Southwest Airlines’ bold shift away from open seating is delivering major revenue gains.
About 60% of Southwest Airlines passengers now pay for seat selection add-ons, up from roughly 20% before the carrier began shifting away from open seating, corporate data shows.
The sharp jump validates Chief Executive Officer Bob Jordan’s strategy to end Southwest’s 53-year-old open-seating policy in favor of assigned seats and other monetized cabin options. After facing pressure from activist investor Elliott Investment Management — which has since scaled back its stake — and amid changing consumer habits, the Dallas-based airline is reconfiguring its fleet to capture premium travel demand while preserving the customer loyalty that has long set it apart.
For more than five decades, Southwest operated a single-class, all-economy cabin with open seating, unbundled fares and its trademark “Bags Fly Free” policy. That model is now giving way to assigned seating, extra-legroom rows and other paid upgrades under a plan the airline calls “Southwest. Even Better.”
Company research found that 80% of current Southwest customers and 86% of prospective passengers prefer assigned seating. Open seating was the top reason cited by passengers who defected to rival airlines, the airline said.
“When a customer elects to stop flying with Southwest and chooses a competitor, open seating is cited as the No. 1 reason for the change,” said Ryan Green, Southwest’s executive vice president of commercial transformation, in a briefing tied to the company’s second-quarter 2024 earnings call.
Jordan announced the overhaul in a July 25, 2024, news release. “Moving to assigned seating and offering premium legroom options will be a transformational change that cuts across almost all aspects of the Company,” he said.
“Although our unique open seating model has been a part of Southwest Airlines since our inception, our thoughtful and extensive research makes it clear this is the right choice—at the right time—for our Customers, our People, and our Shareholders,” Jordan said.
Southwest laid out more detail at a Sept. 26, 2024, investor day in Dallas, where it unveiled its three-year “Southwest. Even Better.” plan.
“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,” Jordan said.
The retrofit touches nearly all of Southwest’s all-Boeing 737 fleet of more than 800 aircraft. About 68 seats per plane — roughly one-third of cabin capacity — will become extra-legroom seating with up to 34 inches of pitch.
To make room without cutting total seat count, Southwest is trimming standard economy pitch on its Boeing 737-8 jets from 32 inches to 31 inches, matching the layout already used on its smaller 737-7 aircraft. The new Recaro seats have slimmer seatbacks and built-in USB-A and USB-C power ports.
Retrofits are proceeding at a rate of 50 to 100 aircraft a month, with Southwest aiming to finish cabin conversions by late 2025. Assigned-seat sales are set to open in the second half of 2025, with full flight operations under the new system beginning in the first half of 2026.
The switch also requires updating more than 60 core IT systems, reservation platforms, mobile apps and gate-management tools. Southwest ran more than 8 million computer simulations and conducted live airport trials, finding that assigned seating eliminates aisle bottlenecking while maintaining historical gate turnaround times. Boarding will shift from three lettered groups to eight groups based on fare type, seat location and Rapid Rewards status.
Southwest initially kept its “Bags Fly Free” policy alongside the seating overhaul, but reversed course in March 2025, ending free checked bags for most fares that May. The airline now charges $45 for a first bag and $55 for a second, with exceptions for A-List Preferred members, Business Select/Choice Extra fares and co-branded cardholders.
Southwest’s other revenue — including early-boarding sales, fare bundling and credit card fees — rose to $579 million in the fourth quarter of 2024, a 2.1% increase from a year earlier, the company said in its fourth-quarter earnings report. Southwest projects the new seat fees will lift unit revenue per available seat mile by 2 to 3 percentage points annually.
The commercial overhaul followed a monthslong dispute with Elliott Investment Management, which built an 11% economic stake in Southwest worth about $1.9 billion in June 2024 and pushed for board and leadership changes. Southwest and Elliott reached a cooperation agreement on Oct. 23, 2024, avoiding a proxy fight.
Under the settlement, Executive Chairman Gary Kelly retired from the board on Nov. 1, 2024, along with six other directors. Five Elliott-nominated directors joined the board, along with former Chevron CFO Pierre Breber, and Gregg Saretsky, a former WestJet CEO, was named chair of the finance committee before departing the board in February 2026. Jordan retained his post as CEO.
“I think we’ll look back and [say that] Elliott 1, the winter storm, [and] Elliott 2, the activist, are two of the most important things that happened to Southwest Airlines, not because they affected what we did, but because they affected the rate of change,” Jordan said.
Southwest is targeting $4 billion in cumulative incremental earnings before interest and taxes by 2027, $500 million in annual cost savings and average annual aircraft capital spending capped at about $500 million. The board also authorized a $2.5 billion share-repurchase program.
“We have a clear and measurable path that we expect will enable us to cover our WACC in 2026 and achieve after-tax ROIC of at least 15 percent in 2027,” said Tammy Romo, Southwest’s executive vice president and chief financial officer.
Southwest is also launching overnight redeye flights, starting with routes from Las Vegas, Los Angeles and Phoenix to East Coast hubs, and has formed an international interline partnership with Icelandair alongside new Getaways by Southwest vacation packages.
The airline’s Rapid Rewards loyalty program, run with Chase, is being restructured around the new seating tiers. A-List members get free seat selection at booking, and A-List Preferred members get complimentary access to any seat, including extra-legroom rows. Southwest and Chase are also developing a premium credit card to compete with the Delta SkyMiles Reserve and United MileagePlus Club cards.
Key Takeaways
- About 60% of Southwest passengers now pay for seat add-ons, up from roughly 20% historically, evidence the airline’s fee strategy is working.
- Southwest is ending 53 years of open seating; assigned-seat sales begin in the second half of 2025, with full operations in the first half of 2026.
- Roughly one-third of cabin seats are becoming extra-legroom rows with up to 34 inches of pitch, while standard-row pitch on 737-8s shrinks to 31 inches.
- Southwest initially preserved “Bags Fly Free” but ended free checked bags for most fares in May 2025, aligning with rival carriers’ fee structures.
- The airline is targeting $4 billion in incremental EBIT by 2027 after a board shake-up tied to activist investor Elliott Investment Management.