Southwest Airlines is set to embark on a new strategic direction by partnering with other carriers starting next year, marking a significant shift for the airline known for its independent approach. This announcement was part of a broader update that also included details about the airline’s planned introduction of assigned seating and extra-legroom seats.
These revelations were made public ahead of Southwest’s Investor Day at its Dallas headquarters on Thursday. The timing is noteworthy as it coincides with Southwest bracing itself for a potential proxy challenge from Elliott Investment Management, which holds a substantial 11% stake in the airline. Elliott Investment Management has indicated its intention to call for a proxy vote as early as next week.
Icelandair to be Southwest’s Inaugural Partner
Icelandair will be Southwest’s first foray back into airline partnerships after a long hiatus. Interestingly, this isn’t a completely new venture; Southwest and Icelandair had a partnership in the 1990s, which was eventually discontinued. For many years since then, Southwest has largely avoided the common industry practice of collaborating with other airlines, preferring to operate independently.
The renewed partnership with Icelandair will initially be centered around Southwest’s Baltimore/Washington International Thurgood Marshall Airport (BWI) hub. This will provide Southwest customers with access to Icelandair’s extensive European network via Keflavik International Airport (KEF) in Reykjavik, Iceland. Southwest has expressed intentions to expand this partnership to include other U.S. cities throughout the coming year, suggesting a phased rollout and growing commitment to inter-airline collaborations. Furthermore, Southwest signaled that it plans to onboard at least one additional partner carrier in the next year, indicating a broader strategy to enhance its network reach through alliances.
Assigned Seating and Extra-Legroom Seats: Enhancing Customer Experience
In addition to partnerships, Southwest is moving forward with previously announced plans to introduce assigned seating, replacing its long-standing open-seating policy. The airline also confirmed that it will be retrofitting its aircraft to include extra-legroom seats for the first time.
According to Thursday’s announcement, Southwest expects to begin selling assigned seats in the latter half of next year. The first flights operating under this new assigned seating model are anticipated in the first half of 2026. The airline clarified that its boarding process will still utilize position numbers and numbered signage at gate areas, maintaining a familiar aspect of the Southwest boarding experience. Notably, premium customers and passengers who purchase premium seats will be given priority boarding.
The new extra-legroom seats will offer passengers up to five additional inches of legroom. While Southwest did not explicitly state a reduction in legroom for standard seats to accommodate the extra-legroom options, they emphasized that they would maintain “a standard economy seat pitch among the best in the industry.” This suggests Southwest aims to offer enhanced comfort without compromising the standard passenger experience.
Southwest also reaffirmed its commitment to customer-friendly policies by continuing to allow customers to check two bags free of charge, a policy that sets it apart from many competitors.
Financial Upside Anticipated from Strategic Initiatives
Southwest Airlines projects that these combined initiatives – strategic partnerships, assigned seating, and extra-legroom options – are expected to yield approximately $4 billion in incremental earnings before interest and taxes (EBIT) by 2027. This financial forecast underscores the significant strategic and financial importance of these changes for Southwest as it navigates the evolving airline industry and seeks to enhance shareholder value amidst external pressures.
