The news: Southwest Airlines expects the low end of its adjusted EPS range to reach $4 this year, more than four times the 93 cents it earned in 2025. The company declined to share the upper end of its outlook, noting it is only a few days into the rollout of assigned seating and extra-legroom options and it needs more time to assess their full impact.

Those gains reflect a fundamental shift in Southwest’s business model, including the move from open seating to assigned seating, the introduction of paid extra-legroom seats, and fees for checked baggage. The airline has also added free Wi-Fi for loyalty members through a partnership with T-Mobile and expanded distribution via Expedia and Priceline to broaden its reach.

The context: Southwest long stood apart thanks to its open seating and “Bags Fly Free” promise. But the airline began charting a new course in 2024 under pressure from activist investor Elliott Investment Management, which pushed it to extract more revenues from each seat. While the changes are likely to deliver a near-term profit boost, they also carry longer-term risk by diluting Southwest’s brand identity and making it harder to distinguish from competitors.

The implications for Southwest and other brands: Southwest is poised to generate meaningfully higher profits in the near term, especially as many airlines increasingly lean on premium offerings to drive steadier growth amid macro uncertainty. That’s not nothing. But that upside comes with a trade-off, as the airline gives up much of what once set it apart.

Southwest appears to believe high-quality service can become its new calling card. That strategy has some support: The airline was recently named The Wall Street Journal’s “best airline of 2025,” and 60% of consumers say good reviews are a top factor when making travel purchases. Still, operational excellence is fragile, and a single disruption—like Southwest’s late-2022 and early-2023 meltdown—can quickly undermine trust.

While bookings have been strong in this year’s first few weeks, the real test will come during peak travel seasons, when competition intensifies. Without its former value-oriented differentiation, Southwest may need to lean more heavily on price.

Ultimately, the risk is less about execution and more about identity. Like Starbucks, which is now rapidly working to rebalance efficiency with its “third place” roots, Southwest may find that preserving what made it different is just as important as improving how well it runs.