Southwest Airlines (LUV) gained roughly 3.5% in Tuesday trading, with the market continuing to re-rate the stock around its multi-part transformation plan that is designed to lift revenue per passenger and expand margins in 2026. Investor attention has centered on monetization levers such as assigned seating and premium/extra-legroom seating, alongside broader product and network tweaks that are intended to generate higher-yield revenue streams.

Southwest’s latest full-year 2026 framework includes adjusted EPS guidance of at least $4.00, and the company has also reiterated a target of $4.3 billion of incremental EBIT contribution from its slate of initiatives in 2026. Bulls view these targets as evidence that Southwest’s structural changes can drive an earnings step-up if execution holds and demand remains resilient.

A recent SEC filing added incremental detail on how the carrier expects booking behavior to evolve as assigned and extra-legroom seating becomes operational, and it also referenced additional network updates. While not a single headline catalyst, the disclosures have supported the view that the transformation is moving from strategy to execution, which can help explain follow-through buying on up days.

Traders will be monitoring near-term demand signals and cost pressures—especially fuel—against Southwest’s 2026 profit targets. The next major test for the bull case is whether the company can demonstrate sustained unit revenue improvement and margin progress as the new seating and fare-product changes scale through 2026.