Southwest Airlines outlines major change for all passengers after months of rumors

Southwest Airlines said Thursday it plans to end the open-boarding system it has used for more than 50 years.

It will launch flights with passengers in assigned seats in the first half of 2026 as the company remodels the airline in hopes of boosting profits.

But the company promised to let passengers check two bags for free and described the policy as “by far the most important feature differentiating Southwest from other airlines.”

CEO Robert Jordan and other Southwest executives detailed the airline’s future transformation at an investor meeting in Dallas. The airline’s shares rose 6 percent in afternoon trading.

The airline plans to reserve a third of the seats on its flights for passengers who would pay a premium to get up to two inches of extra legroom – providing a source of more revenue.

The changes to some of Southwest’s idiosyncratic habits are aimed at reversing its slumping stock price and fending off hedge fund Elliott Investment Management, which could cost Southwest’s leaders their jobs.

It was a busy week for the airline. On Wednesday, Southwest said it did cutting nearly a third of its flights to and from Atlanta in a cost-cutting bid.

The changes will eliminate more than 300 pilot and flight attendant jobs in Atlanta, but there will be no job losses. The staff will have to move to another hub.

That schedule change came two days after the bosses announced warned that the company will have to make some “difficult decisions” as part of a plan to restore profits.

The loss of flights to Atlanta is not as drastic as other changes in April, when Southwest canceled flights to four airports and laid off 2,000 employees.

Southwest yes desperately trying to cut costs while it struggles Elliott Investment Management, a powerful hedge fund that has amassed a ten percent stake in the airline. Elliott demands measures to reduce costs and increase profits.

Southwest first said it would eliminate its popular open-seating policy in the summer, but only revealed more details today.

The airline said it expects to start selling assigned seats in the second half of 2025, like all other airlines, and to launch flights under the new model in the first half of 2026.

The open boarding system it has used will disappear and passengers will be able to choose their seats in advance, just like all other major airlines.

Southwest says surveys show that 80 percent of customers now want to know their seat before arriving at the airport, rather than having to search for available seats as they board the plane.

As part of the switch, the airline will have four fare levels, with customers paying more extra for so-called premium seats that offer greater convenience or comfort.

Southwest officials told investors that focus groups and surveys showed customers have a strong desire for the ability to personalize their flight experiences according to their budgets. The airline said it expects the premium product to appeal to business travelers.

The introduction of assigned and premium seating will also require some changes in the way passengers board planes before takeoff.

In the past, Southwest customers were assigned their seats in the boarding lines based on when they checked in and then left to look for their preferred seat on the plane.

The system had become less democratic over time as Southwest charged people extra to guarantee early spots.

The airline said that going forward, boarding groups will no longer be based on check-in times and that its “most loyal customers and those who purchase premium seats” will be given priority.

But the airline made clear it would continue to offer passengers the option to check in two bags for free.

There are concerns about the future of the ‘bags fly free’ benefit. Elliott is demanding it be dumped, saying bag fees will generate tens of millions of dollars in revenue.

A report published earlier this year showed how airlines such as Delta, United and American do this earned a whopping $33.3 billion last year on baggage fees alone — a sharp 15 percent increase from $29 billion in 2022. Wall Street has long argued that Southwest is leaving money behind.

But Southwest has built years of advertising campaigns around bag-fly-free.

Taking away that advantage could change the airline’s DNA as much – if not more – than dumping open seats.

The airline said abolishing its policy would “reduce demand and far outweigh any revenue gain created by imposing and collecting baggage fees.”

The airline has already introduced passenger-friendly policies, such as open seating, in an effort to fend off changes demanded by activist Elliott Investment Management.

The new moves will be announced at an investor day in Dallas, as investors like Elliott look to oust CEO Bob Jordan and appoint a new board with their own nominees.

Southwest has been considering an overhaul for months, but the push for radical change became even more important for management this summer, when Elliott Investment Management blasted the company for its dismal stock performance since early 2021.

Elliott is fighting to oust CEO Bob Jordan and introduce a new board with its own nominees.

Southwest, which once posted a record 47 straight years of profit before the pandemic, is currently struggling to regain sustainable profitability.

Shawn Cole, a founding partner of executive search firm Cowen Partners, whose firm has worked for other airlines but not Southwest, believes Southwest is too insular and should follow the recent examples of Starbucks and Boeing and consider an outsider like CEO needs to hire. He thinks many qualified managers would be interested in the job.

“It would undoubtedly be a challenge, but Southwest is a storied airline that many people remember fondly,” Cole said. “If Boeing can do it, Southwest can do it too.”