Why Southwest Airlines Stock Is Taking Off Today

Southwest Airlines (LUV 7.31%) today raised its forecast for the third quarter and announced a series of steps aimed at revitalizing its business model. Investors are jumping on board, sending Southwest shares up 11.4% on the day and 7.6% as of 1pm ET.

Building a better airline

Southwest is an airline pioneer, but the company has been through turmoil in recent years. Shares have lost more than 40% of their value over the past five years, and earlier this year activist Elliott Management called for a turnaround of the company.

On Thursday, Southwest unveiled its plan to course-correct itself. The company, as expected, said it will start selling assigned seats in the second half of 2025, including add-ons such as premium seats and boarding upgrades.

The airline is also in the process of strengthening global partnerships and plans to streamline operations.

“We are now ushering in a new era at Southwest, moving quickly and deliberately to transform the company by enhancing the customer experience, improving financial performance and increasing sustainable shareholder value,” CEO Bob Jordan said in a statement.

The changes will take time to implement, but Southwest also offered short-term reason for optimism. The company raised its third-quarter revenue forecast to 3 percent, better than the previous decline of 2 percent, and announced a new $2.5 billion share buyback plan.

Southwest also named Bob Fornaro, who was CEO of AirTran Holdings when Southwest acquired it, to the company’s board of directors.

Is Southwest stock a buy?

Southwest has a strong brand and the size and scale to be a dominant force in the airline industry. The problem has been a business model that hasn’t kept up with the times, and Jordan’s moves should help solve that problem.

Unfortunately for investors, this change will take time. Some of the moves Southwest is announcing today won’t come to fruition until early 2026. There’s potential here, but investors should be aware that it could be a long wait.