On January 29, 2026, Morgan Stanley upheld its Overweight rating on Southwest Airlines, concurrently lifting its 12-month price target from $50 to $55. This adjustment factors in the anticipated revenue uplift from recently introduced seat assignment and ancillary services. The firm’s analysis projects that these strategic changes will materially improve unit economics, driving investor confidence in Southwest’s capacity to outperform peers in 2026.

Following the rollout of assigned seating—an operational shift that ended a 54-year open boarding policy—Southwest now anticipates a fourfold increase in annual profits compared with 2025 levels. Investor response was swift: the airline registered its largest one-day share gain in 17 years, with volume rising roughly 20% above the 30-day average. Market participants have attributed this surge to the prospect of upselling premium seats and extra legroom options introduced alongside the new boarding process.

CEO Bob Jordan highlighted that the introduction of basic economy fares, seat-selection fees and extra legroom seating represents the most significant operational overhaul in Southwest’s history. Management forecasts that these initiatives will generate approximately $1 billion in incremental EBIT in 2026 solely from seat-related upsells, contributing to a total expected EBIT increase of $4.3 billion. Concurrently, the airline projects first-quarter unit revenue growth of at least 9.5% year-over-year, reflecting improved yield management and customer segmentation.