Morgan Stanley recently reaffirmed its bullish stance on Southwest Airlines, maintaining an Overweight rating and raising its price target by roughly ten percentage points. The upgrade underscores the firm’s confidence in the carrier’s strategic initiatives and its ability to generate stronger cash flows over the next 12 months.

Southwest’s shift from an open seating model to assigned seating is expected to drive a fourfold increase in annual profits, according to internal forecasts. This strategic adjustment enables the airline to capitalize on upselling opportunities, reduces boarding congestion, and enhances operational predictability, all of which contribute to margin expansion.

In tandem with assigned seating, Southwest has introduced premium legroom options and a tiered fare structure, designed to boost ancillary revenue and improve the overall passenger experience. Investor enthusiasm was evident when the stock jumped in double-digit percentage terms on the announcement day, marking its strongest single-session performance in nearly two decades. CEO Bob Jordan highlighted that these changes represent the largest operational overhaul in the company’s history and are poised to support sustained growth throughout 2026.