Southwest Airlines says it will introduce assigned seats and premium perks in 2026

DALLAS (AP) — Southwest Airlines executives on Thursday unveiled their vision for Southwest 2.0, an airline that for the first time will give passengers assigned seats, charge them extra for more legroom and offer red-eye flights but bags still will fly free.

The airline announced that it plans to end the open-boarding system it has used for more than 50 years and start flights with assigned seats during the first half of 2026 as it responds to shifting consumer tastes and tries to reverse a three-year slump in profits.

CEO Robert Jordan and other Southwest executives outlined the future refresh during an investor meeting in Dallas where they tried to convince shareholders that they can increase revenue by winning over younger and more affluent customers.

The moves away from Southwest’s simple business model and quirky traditions come as airline management faces pressure from activist investor Elliott Investment Management. The hedge fund blames management for Southwest’s recent underperformance compared with its closest rivals, and wants to replace Jordan and most of the Southwest board.

Along with introducing assigned seats, the airline will make about one-third of them higher-priced premium seats with up to five inches of extra legroom. That will require removing a row of seats on some planes. Work to retrofit the fleet will start in the first half of next year and be completed by the end of 2026, executives said.

Southwest said those moves, along with changes to its network, will add about $1.5 billion in pretax earnings in 2027.

Before Thursday’s event started, Southwest announced a $2.5 billion share-buyback program designed to make existing shares more valuable. It also said that a third-quarter revenue ratio will rise by up to 3% instead of being between flat and down 2%.

Shares of Southwest Airlines Co. rose 8% in midday trading.

In dumping open seating, Southwest said its surveys show that 80% of its customers now want to know their seat before they get to the airport instead of having to search for open seats when they board the plane.

As part of the switch, the airline will have four airfare tiers, each offering more convenience and comfort. Southwest officials said the premium product will appeal to business travelers.

Southwest stopped short of changing another of its longtime characteristics: letting passengers check up to two bags for free, a break from fees that are charged by all other leading U.S. airlines. Executives said it's the most important feature in setting Southwest apart from rivals.

U.S. airlines brought in more than $7 billion in revenue from bag fees last year, with American and United reaping more than $1 billion apiece. Wall Street has long argued that Southwest is leaving money behind.

Southwest, which has built years of advertising campaigns around bags-fly-free, estimated that bag fees would raise about $1.5 billion a year, but eliminating the perk could drive away passengers, costing the airline $1.8 billion, or a net loss of $300 million a year.

Southwest had contemplated an overhaul for months, but the push for radical change became even more important to management this summer, when Elliott Investment Management targeted the company for its dismal stock performance since early 2021.

Southwest is trying to fend off a possible proxy fight as early as next week with Elliott, a hedge fund controlled by billionaire financier Paul Singer that is the airline’s second-largest shareholder. Along with firingJordan, it wants to replace two-thirds of Southwest’s board. Elliott has a slate of 10 director candidates, including former airline CEOs.

Southwest gave ground this month, when it announced that six directors will leave in November and Chairman Gary Kelly will step down next year. On Thursday, it named a former AirTran and Spirit Airlines CEO to its board.

The airline is digging in to protect Jordan, however.

Jordan argued that the plan laid out Thursday should satisfy investors.

“We do not believe that a proxy fight is in the best interest of the company, and we remain willing to work with Elliott on a cooperative approach,” he said.

Jordan said the refresh plan had been in the works a long time. “For Elliott to call that plan rushed and haphazard, in my opinion is inane,” he said.

The hedge fund responded by dismissing the turnaround plan as too little, too late, and reiterated its argument that the Southwest CEO needed to go.

“Another promise of a better tomorrow from the same people who have created the problems we face today,” a statement Elliott issued after the investor presentation stated. “Without credible leadership that can execute, this plan – filled with long-dated promises of better performance – risks becoming the latest in Southwest’s long series of failed improvement initiatives.”

Company management headed into the investor day having angered an important interest group: its own workforce. The airline told employees Wednesday that it will make sharp cuts to service in Atlanta next year, resulting in the loss of 340 pilot and flight attendant positions.

Employee unions are watching the fight between Elliott Investment Management and airline management, but they are not taking sides. “That’s between Southwest and Elliott, and we’ll see how it plays out,” Alison Head, a flight attendant and union official in Atlanta, said.

However, the unions are concerned that more of their members could be forced to relocate or commute long distances to keep their jobs. Southwest’s chief operating officer told employees last week that the airline will have to make “difficult decisions” about its network to improve its financial performance.

Shawn Cole, a founding partner of executive search firm Cowen Partners, whose firm has worked for other airlines but not Southwest, believes Southwest is too insular and should follow the recent examples of Starbucks and Boeing and hire an outsider as CEO. He thinks many qualified executives would be interested in the job.

“It would be a challenge, no doubt, but Southwest is a storied airline that a lot of people think fondly of,” Cole said. “If Boeing can do it, Southwest can do it.”

Southwest Airlines Ryan Green responds to questions during a news conference at the company's headquarters in Dallas, Thursday, Sept. 26, 2024. (AP Photo/Tony Gutierrez)

Southwest Airlines Andrew Watterson responds to questions during a news conference at the company's headquarters in Dallas, Thursday, Sept. 26, 2024. (AP Photo/Tony Gutierrez)

Southwest Airlines Andrew Watterson responds to questions during a news conference at the company's headquarters in Dallas, Thursday, Sept. 26, 2024. (AP Photo/Tony Gutierrez)

Southwest Airlines Bob Jordan responds to questions during a news conference at the company's headquarters in Dallas, Thursday, Sept. 26, 2024. (AP Photo/Tony Gutierrez)

Southwest Airlines Bob Jordan responds to questions during a news conference at the company's headquarters in Dallas, Thursday, Sept. 26, 2024. (AP Photo/Tony Gutierrez)

FILE - Travelers line up to board a Southwest Airlines plane at Love Field in Dallas, Thursday, July 25, 2024. (AP Photo/LM Otero, File)

FILE - A Southwest Airlines plane moves to depart from Love Field in Dallas, July 25, 2024. (AP Photo/LM Otero, File)

FILE - A Southwest Airlines ticket agent checks in passengers at Love Field in Dallas, July 25, 2024. (AP Photo/LM Otero, File)

NEW YORK (AP) — Israeli Prime Minister Benjamin Netanyahu on Thursday vowed to carry out “full force” strikes against Hezbollah until it ceases firing rockets across the border, dimming hopes for a cease-fire proposal put forth by U.S. and European officials.

Israel carried out a new strike in the Lebanese capital, which it said killed a senior Hezbollah commander, and the militant group launched dozens of rockets into Israel. Tens of thousands of Israeli and Lebanese people living near their countries' border have been displaced by the fighting.

Netanyahu spoke as he landed in New York to attend the annual U.N. General Assembly meeting, where U.S. and European officials were putting heavy pressure on both sides of the conflict to accept a proposed 21-day halt in the fighting to give time for diplomacy and avert all-out war.

Nearly 700 people have been killed in Lebanon this week as Israel dramatically escalated strikes, saying it is targeting Hezbollah’s military capacities. Israeli leaders say they are determined to stop the group's cross-border attacks, which began after Hamas' Oct. 7 attack that ignited the war in Gaza.

Israel’s “policy is clear," Netanyahu said. "We are continuing to strike Hezbollah with full force. And we will not stop until we reach all our goals, chief among them the return of the residents of the north securely to their homes.”

Just before his comments, the Israeli military said it killed a Hezbollah drone commander, Mohammed Hussein Surour, in an airstrike in the suburbs of Beirut. Hezbollah did not immediately comment on the claim. The Health Ministry said two people were killed and 15 wounded in the strike.

The strike gutted an apartment in a residential building in Dahiyeh, the mainly Shiite suburb where Hezbollah has a strong presence, according to Associated Press photos of the scene.

Over the past week, Israel has carried out several strikes in Beirut targeting senior Hezbollah commanders. One strike in eastern Lebanon on Thursday killed 20 people, most of them Syrian migrants, according to Lebanese health officials.

Israel hit 75 sites early Thursday across southern and eastern Lebanon and launched a new wave of strikes in the evening, the military said. Throughout the day, Hezbollah fired some 175 projectiles into Israel, the Israeli military said. Most were intercepted or fell in open areas, sparking some wildfires, though one rocket hit a street in a town near the northern city of Safed.

Israel has talked of a possible ground invasion into Lebanon to drive Hezbollah -- an Iranian-backed Shiite group that is the strongest armed force in Lebanon -- away from the border. It has moved thousands of troops to the north in preparation. Some 100,000 Lebanese have fled their homes in the past week, streaming into Beirut and points further north.

The escalation has raised fears of a repeat – or worse – of the 2006 war between the two sides that wreaked destruction across southern Lebanon and other parts of the country and saw heavy Hezbollah rocket fire on Israeli cities.

“Another full-scale war could be devastating for both Israel and Lebanon,” U.S. Defense Secretary Lloyd Austin said after talks with his British and Australian counterparts in London.

U.S. Secretary of State Antony Blinken was at the U.N. meeting with Israeli officials over the truce proposal. Speaking in an interview with MSNBC, he said major powers, the Europeans and Arab nations were united, “everyone speaking with one clear voice about the need to get that cease-fire in the north.”

“I can’t speak for him,” Blinken said of Netanyahu.

Hezbollah has not yet responded to the proposal. Lebanon’s caretaker Prime Minister Najib Mikati welcomed it, but his government has no sway over the group.

Netanyahu’s office downplayed the initiative, saying in a statement that it was only a proposal.

One of Netanyahu’s far-right governing partners threatened on Thursday to suspend cooperation with his government if it signs onto a temporary cease-fire with Hezbollah – and to quit completely if a permanent deal is reached. It was the latest sign of displeasure from Netanyahu’s allies toward international cease-fire efforts.

“If a temporary cease-fire becomes permanent, we will resign from the government,” said National Security Minister Itamar Ben-Gvir, head of the Jewish Power party.

If Ben-Gvir leaves the coalition, Netanyahu would lose his parliamentary majority and could see his government come toppling down, though opposition leaders have said they would offer support for a cease-fire deal.

Hezbollah has insisted it would halt its strikes only if there is a cease-fire in Gaza, where Israel has battled Hamas for nearly a year. That appears out of reach despite months of negotiations led by the United States, Egypt and Qatar.

One day after Hamas’ Oct 7 attack on southern Israel that triggered the war in Gaza, Hezbollah began firing rockets into northern Israel, bringing Israeli counterfire and a cycle of reprisals that has gone on near daily since. Hezbollah says its barrages are a show of support for Palestinians and that it is targeting Israeli military facilities, though rockets have also hit civilian areas.

Before this week, the cross-border exchanges had killed about 600 people in Lebanon, mostly militants but including more than 100 civilians, and about four dozen people in Israel, roughly half of them soldiers and the rest civilians. The fighting also forced tens of thousands to flee homes on both sides of the border.

Israel says its escalated strikes across Lebanon the past week are targeting Hezbollah rocket launchers and other military infrastructure. Since Monday, strikes have killed more than 690 people in Lebanon, around a quarter of them women and children, according to local health authorities.

The campaign opened with what is widely believed to be an Israeli attack on Sept. 18 and 19 detonating thousands of pagers and walkie-talkies used by Hezbollah, killing at least 39 people and maiming thousands more, including civilians.

Hezbollah in turn has fired hundreds of rockets into Israel. Several people in Israel have been wounded. On Wednesday, the group fired on Tel Aviv for the first time with a longer-range missile that was intercepted.

Early Thursday, an Israeli airstrike hit a building housing Syrian workers and their families near the ancient city of Baalbek in Lebanon’s eastern Bekaa Valley. The Lebanese Health Ministry said 19 Syrians and a Lebanese were killed, one of the deadliest single strikes in Israel’s intensified air campaign.

Hussein Salloum, a local official in Younine, said most of the dead were women and children. The state news agency had initially reported that 23 people were dead.

Lebanon, with a population of around 6 million, hosts nearly 780,000 registered Syrian refugees and hundreds of thousands who are unregistered — the world’s highest refugee population per capita.

Mroue reported from Beirut, Lidman from Tel Aviv.

Lebanese soldiers cordon off the area at the site of an Israeli airstrike in Beirut's southern suburbs, Thursday, Sept. 26, 2024. (AP Photo/Hassan Ammar)

A resident checks an apartment that was hit by an Israeli airstrike in Beirut's southern suburbs, Thursday, Sept. 26, 2024. (AP Photo/Hassan Ammar)

Israeli Iron Dome air defense system fires to intercept rockets that were launched from Lebanon, as seen from Haifa, northern Israel, Thursday, Sept. 26, 2024. (AP Photo/Baz Ratner)

A damaged building at the site of an Israeli airstrike in Beirut's southern suburbs, Thursday, Sept. 26, 2024. (AP Photo/Hassan Ammar)

A man carries a damaged bicycle at the site of an Israeli airstrike in Saksakieh, south Lebanon, Thursday, Sept. 26, 2024. (AP Photo/Mohammed Zaatari)

A man carries pictures of his relatives standing at the site of an Israeli airstrike in Saksakieh, south Lebanon, Thursday, Sept. 26, 2024. (AP Photo/Mohammed Zaatari)

Displaced children sit in a classroom in Beirut, after fleeing the Israeli airstrikes in the south with their families, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

Displaced children play in a classroom at a school, in Beirut, after fleeing the Israeli airstrikes in the south with their families, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

A displaced boy sleeps in a classroom in Beirut, after fleeing the Israeli airstrikes in the south with his family, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

Displaced youth hug as they take shelter at a school in Beirut, after fleeing the Israeli airstrikes in the south with their families, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

Displaced people gather in the hallway of a school in Beirut, after fleeing the Israeli airstrikes in the south, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

Volunteers distribute clothes to displayed women at a school in Beirut, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

Displaced women smoke waterpipes as they sit in a school in Beirut, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

Displaced people sit in a school yard in Beirut, after fleeing the Israeli airstrikes in the south, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

Displaced women and children sit in a classroom in Beirut, after fleeing the Israeli airstrikes in the south, Thursday, Sept. 26, 2024. (AP Photo/Bilal Hussein)

People take cover as a siren sounds a warning of incoming rockets fired from Lebanon, in Safed, northern Israel, Thursday, Sept. 26, 2024. (AP Photo/Ariel Schalit)

People run to take cover as a siren sounds a warning of incoming rockets fired from Lebanon, in Safed, northern Israel, Thursday, Sept. 26, 2024. (AP Photo/Ariel Schalit)

Ali Abdel Rahman Zorout, 5, who was wounded in an Israeli airstrike, poses for a picture at the Alaaeddine Hospital in Sarafand, south Lebanon, Thursday, Sept. 26, 2024. (AP Photo/Mohammed Zaatari)

Fatima Abdel Rahman Zorout, 7, who was wounded in an Israeli airstrike, is wheeled on a gurney at the Alaaeddine Hospital in Sarafand, south Lebanon, Thursday, Sept. 26, 2024. (AP Photo/Mohammed Zaatari)

A man carries a damaged bicycle at the site of an Israeli airstrike in Saksakieh, south Lebanon, Thursday, Sept. 26, 2024. (AP Photo/Mohammed Zaatari)

A man stands on top of a damaged car at the site of an Israeli airstrike in Saksakieh, south Lebanon, Thursday, Sept. 26, 2024. (AP Photo/Mohammed Zaatari)

A man reacts in a damaged apartment at the site of an Israeli airstrike in Saksakieh, south Lebanon, Thursday, Sept. 26, 2024. (AP Photo/Mohammed Zaatari)

An emergency worker cuts concrete blocks as he searches for survivors at the scene of an Israeli airstrike in the town of Maisara, north of Beirut, Wednesday, Sept. 25, 2024. (AP Photo/Bilal Hussein)