Southwest Airlines CEO Bob Jordan gave further detail on the company's planned $4.3bn incremental EBIT expected for 2026, while speaking at the Bernstein Strategic Decisions Conference.
The $4.3bn includes $1bn in base business changes, including improvements to its network and boosting load factor. This also includes improvements to its revenue management system, which Jordan said the company “had some hiccups” when implemented last year.
The assigned seating and extra legroom products were valued at around $1.5bn incremental EBIT for 2026. There is also a $1bn cost initiative, which Jordan said was “well underway” and will exit the year with “half of that already in place”.
“Then the other $800 million is the revenue contribution from things that that are already in place of as of yesterday such as bag fees, credit exploration, and changes to the loyalty programme on earn and burn,” he said.
In total, this amounts to the $4.3bn incremental EBIT for next year promised by the company.
“The $4.3bn is not complex in terms of what makes it up,” he explained. “And it isn't a set of initiatives that are crazy things that Southwest is doing that are unique to the industry. These are really things that the industry is doing.”
Jordan highlighted the new baggage fee initiative's “low risk of implementation” as well as its “low risk of hitting the financial numbers”. He added: “Because these are things that nearly every other airline does, it's easy to see the values that they up off of those initiatives.”
While some have criticised Southwest for abandoning its long-standing open seating free bag policy, other analysts have commended the airline for taking action as yields have begun to dip in an overcapacity environment.
United Airlines CEO Scott Kirby, also speaking at the Bernstein conference, commented on Southwest's new policies: “We're pretty good at being a network, full-service airline. They are not. Southwest had the best business model in the history of aviation, and they're awesome at the point-to-point Southwest. But they are the fourth best large legacy airline. The more they look like us, the better it is for us.”
However, he later added that while bag fees and change fees will “make Southwest more profitable”, though it will be not be a market share shift. “It's going to be generating more revenue from their customer base, which will be great for them,” he added. “But they're not going to get market share shift away from United because United is still better for our customer set.”
The new policy does still allow two free checked bags for business travellers and ‘A-list’ members of its loyalty programme.
Jordan added during the call that he can “definitely see the improvements at Boeing” and the company is “eager to get more aircraft".
“The good thing is we have a very attractive orderbook for a lot of aircraft at very attractive pricing,” said Jordan. “Our growth has been relatively low. And if we don't take all those aircraft for our own uses, then we will monetize those into the market. Our pricing compared to what the market pricing in -- is very strong. And whether we take the aircraft or we decide to sell the aircraft into the market, we're going to monetize every dime of value that we have in the Boeing order book.”