Southwest Airlines is expecting its widespread business transformation changes to spark a financial boom this year.
Based in Dallas, Love Field‘s anchor carrier reported a net income of $323 million, and a full-year net income of $441 million. That’s more than American Airlines, its North Texas rival that posted fourth-quarter net income of $99 million during the quarter, and full-year net income of $111 million, the company reported on Tuesday.
“Fourth quarter performance benefited from revenue initiatives and continued cost control, contributing to solid results and strong momentum,” Southwest said in a statement.
“Notwithstanding the impact of Winter Storm Fern, 2026 is off to a strong start, driven by the Company’s Customer-focused product offering, operational excellence, and dramatic progress from the transformational initiatives implemented last year.”
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The carrier is expecting RASM (revenue per available seat miles) to jump at least 9.5% year-over-year in the first quarter. Available seat miles, or the capacity of passengers it can carry, to be up 1% to 2% in the first quarter and up 2% to 3% for the entire year.
“Southwest closed 2025 with strong momentum,” chief executive Bob Jordan said in a statement. He touted the company’s series of major business changes, which included implementing bag fees, basic economy fares and as of this week, assigned and extra legroom seating onboard aircraft.
Southwest also introduced perks like free Wi-Fi for members of its loyalty program, Rapid Rewards.
“We also outperformed our cost reduction goals, strengthened operational reliability through new technology, and returned $2.9 billion to our Shareholders through share repurchases and dividends,” the CEO added.
“That foundation positions us well for long‑term success and sets the stage for significant earnings growth this year.”
This is the first full-year in which Southwest’s new bag policy will be in effect, which the carrier is hoping will drive up its profit margins.
The carrier may also be exploring bigger changes to its business model. The Dallas Morning News previously reported that Southwest is looking into the possibility of launching international long-haul flights to Europe and opening airport lounges.
Southwest has also invested heavily in its operations, recently opening a new network operations control floor at its headquarters.
It is also expecting to take delivery of 66 Boeing 737 aircraft this year and plans to retire about 60 aircraft.