Southwest Outlines Three-year Growth Plan, To Buy Back $2.5 Bln Shares; Stock Up

(RTTNews) - Southwest Airlines Co. (LUV), amid its ongoing tussle with its shareholder Elliott Investment Management L.P., on Thursday outlined next steps in a comprehensive three-year plan expected to increase revenue opportunities. The Board of Directors also approved a $2.5 billion share repurchase program, reflecting its confidence in the strategic plan and new revenue-generating initiatives.

In pre-market activity on the NYSE, Southwest shares were gaining around 4 percent to trade at $29.51.

Ahead of its Investor Day briefing in Dallas today, Southwest stated that it expects, by 2027, to deliver around $4 billion in cumulative incremental earnings before interest and taxes or EBIT contribution, and after-tax return on invested capital or ROIC of 15 percent or greater, well above weighted average cost of capital.

The company's multi-year plan is expected to deliver an estimated $500 million run rate of cost savings in 2027. This will be through minimizing hiring, optimizing scheduling efficiency, capitalizing on supply chain opportunities, and improving corporate efficiency.

Southwest's fleet strategy is expected to reduce average aircraft capital expenditures to approximately $500 million through 2027.

The company also launched new commercial initiatives to enhance customer experience and drive value while preserving flexible policies like bags fly free.

Southwest said it will broaden its consumer appeal and boost demand through an assigned seating model. Airline passengers now have a clear preference for seat assignments. The Company expects to begin selling assigned seats in the second half of 2025, with its first flights operating with the new model in the first half of 2026.

Further, Southwest will offer extra legroom options with up to five additional inches of pitch for around a third of its seats while maintaining a standard economy seat pitch. New seating product options are expected to drive demand and are expected to generate more revenue per passenger.

In addition to offering more Customer choice, Southwest will launch new capabilities and products designed to add value and revenue potential. These include global airline partnerships, Getaways by Southwest, and Rapid Rewards Enhancements.

Icelandair will become Southwest's initial partner with an expected launch in 2025 through Baltimore-Washington International Airport, which will serve as its first U.S. gateway for the carriers.

In 2025, the Company intends to launch a new product, Getaways by Southwest, offering customizable vacation packages, which will feature Southwest's generous cancellation policy and flexibility with its no change fees for flights extending to hotels and other elements of packaged vacations.