Assigned seating to deliver $1B EBIT in 2026, $1.5B run rate by 2027
Southwest Airlines reported a strong Q3 2025 with record revenue and cost discipline, and reaffirmed full-year EBIT guidance of $600-800M. Management struck a confident tone on the transformation, citing on-track initiatives including assigned seating and bag fees, which will drive significant EBIT growth in 2026. Cross-company signal includes positive mentions of Boeing's delivery reliability and new distribution partnerships with T-Mobile and Priceline. Q3 revenue record, RASM up 0.4%, CASMX beat by 2 points.
Buzzberg readAssigned seating to deliver $1B EBIT in 2026, $1.5B run rate by 2027Southwest Airlines reported a strong Q3 2025 with record revenue and cost discipline, and reaffirmed full-year EBIT guidance of $600-800M. Management struck a confident tone on the transformation, citing on-track initiatives including assigned seating and bag fees, which will drive significant EBIT growth in 2026. Cross-company signal includes positive mentions of Boeing's delivery reliability and new distribution partnerships with T-Mobile and Priceline. Q3 revenue record, RASM up 0.4%, CASMX beat by 2 points.Read full analysisCollapse analysis
Southwest Airlines reported a strong Q3 2025 with record revenue and cost discipline, and reaffirmed full-year EBIT guidance of $600-800M. Management struck a confident tone on the transformation, citing on-track initiatives including assigned seating and bag fees, which will drive significant EBIT growth in 2026. Cross-company signal includes positive mentions of Boeing's delivery reliability and new distribution partnerships with T-Mobile and Priceline. Q3 revenue record, RASM up 0.4%, CASMX beat by 2 points.
Assigned seating + extra legroom expected to add >$1B EBIT in 2026.
Boeing delivery plan on track; 2025 delivery assumption raised to 53 737-8 aircraft.
RASM rev growth0.4%
reported
Revenue$6.949B
reported
EPS$0.11
reported
Gross margin16.66%
reported
What changed this quarter
01
Guidance
Assigned seating to deliver $1B EBIT in 2026, $1.5B run rate by 2027
Guidance tone
02
Guidance
Full-year EBIT guidance maintained at $600-$800 million
Guidance tone
03
Demand
Q4 RASM expected up 1%-3%, capacity up ~6%
Management expressed strong confidence in execution, reiterated full-year guidance, and highlighted accelerating transformation and initiative momentum.
04
Ancillary Revenue
Bag fees annualized contribution around $1 billion
Assigned seating + extra legroom expected to add >$1B EBIT in 2026.
Demand & capex
Demand
Bookings & conversion
Q4 RASM expected up 1%-3%, capacity up ~6%. Management expressed strong confidence in execution, reiterated full-year guidance, and highlighted accelerating transformation and initiative momentum.
Capex
Investment and capacity
Management raised 2025 Boeing 737-8 delivery expectations from 47 to 53 aircraft and maintained full-year capital spending guidance of $2.5-$3 billion, reflecting continued fleet investment. They also highlighted ongoing investments in product, customer experience, and operational technology, while emphasizing disciplined cost management.
Tone · Confident
Management expressed strong confidence in execution, reiterated full-year guidance, and highlighted accelerating transformation and initiative momentum.
Supply-chain alpha
A1
Boeing is consistently hitting delivery milestones, allowing Southwest to increase 2025 737-8 delivery count by 6 aircraft and retire more 737-800s.
Southwest is delaying 737-700 retrofits to January, adding two points of capacity during the peak holiday season at almost no incremental cost, which is EBIT-accretive but RASM-dilutive.
“We are pushing out the retrofit timing... allowing us to capture additional revenue in those six seats during the entire holiday period at almost no incremental cost.”
Bob JordanPresident, CEO & Vice Chairman of the Board, Southwest Airlines
… in customer net promoter score on aircraft with this new configuration. Additionally, we have continued to launch new products and services showing our commitment to meeting the needs of our customers and our ability to execute quickly. Starting tomorrow, we will be offering free Wi-Fi, sponsored by our partner T-Mobile, for our Rapid Awards members. We continue to roll out our updated cabins with larger overhead bins, in-seat power, upgraded lighting, and more. We expanded our distribution channels, launching a partnership with Priceline. We launched our new in-house vacation product, Getaways by Southwest. We announced a new partnership with EVA Air to provide customers more connection opportunities. We announced new markets, including the additions of Knoxville, Tennessee, St. Martin, Santa Rosa, California, and our first-ever flights to Alaska, servicing Anchorage, all to start in 2026. And we aren't done. While we don't have specifics to share today, we're actively looking at continued changes to widen our product offering for our customers, provide additional premium revenue opportunities and further enhance our rapid rewards loyalty program and co-brand economics, …
Boeing is consistently hitting delivery milestones, allowing Southwest to increase 2025 737-8 delivery count by 6 aircraft and retire more 737-800s. — Steady Boeing deliveries support Southwest's capacity and cost plans, and signal improving production reliability for BA.
Tom DoxeyChief Financial Officer, Southwest Airlines
… we are expecting strong continued cost execution, with Casamax up in the range of 1.5 to 2.5%, on capacity up approximately 6%, both on a year-over-year basis, excluding the impact of expected book gains from fleet transactions in the fourth quarter of both years, which gives a more accurate view of the cost performance of the underlying base business We expect CASMX to be in the range of flat to up 1% year over year. Turning to fleet, Boeing continues to hit their delivery plan, and we've increased our 2025 delivery assumptions from 47 to 53 Boeing 737-8 aircraft. We received eight aircraft deliveries in the third quarter and retired 16 aircraft from our fleet, including the sale of one 737-800 aircraft. and plan to sell four additional 737-800 aircraft in the fourth quarter. We will continue to be opportunistic as we evaluate potential sale transactions from our existing fleet. We continue to expect full-year 2025 capital spending to be in the range of $2.5 to $3 billion, which includes the additional aircraft deliveries expected this year, as well as the expected proceeds from aircraft sales. We finished the quarter with $3 billion in cash in line with our liquidity …
Southwest is delaying 737-700 retrofits to January, adding two points of capacity during the peak holiday season at almost no incremental cost, which is EBIT-accretive but RASM-dilutive.