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Southwest Airlines Announces It's Ending Its Open Seating
(Mario Tama/Getty Images)

Southwest logs its biggest gain since 1978 as it says bag fees and seating changes will quadruple profit

Southwest shares closed up 19% on Thursday, their biggest daily gain in nearly half a century.

Max Knoblauch

Despite some initial friction from the flying (and posting) public, Southwest Airlines is feeling pretty bullish about its recent revenue-boosting initiatives like bag fees and premium seating options.

In its fourth-quarter earnings report, released after the bell Wednesday, the airline guided for full-year adjusted earnings of “at least” $4 per share, more than quadruple its adjusted profit of $0.93 per share last year and $0.96 per share in 2024.

The carrier’s shares closed up 19% on Thursday, marking their best daily gain since 1978. (No, that’s not a typo.)

Driving those profits are low-cost, high-reward changes like bag fees, which Southwest earlier this year said would bring in more than $350 million in 2025, tracking at $1 billion annualized. On its Thursday earnings call, Southwest highlighted another byproduct of its new fees.

“As we carry fewer bags overall, which we knew would be a byproduct of the bag fee, there are fewer bags onboard the aircraft, and there is a fuel savings that comes from that,” said CFO Tom Toxey.

While Southwest warned in 2024 that changing popular policies like its two free checked bags would “drive down demand and far outweigh any revenue gains,” the airline now says it’s not seeing any negative reaction yet.

“We are not seeing book away from Southwest Airlines. If anything, we’re encouraged that we’ll see share shift to Southwest Airlines because the product is a stronger offering now, especially with corporate,” CEO Bob Jordan said on Southwest’s Thursday earnings call. According to Jordan, bookings for everything related to the carrier’s bag fees and premium tickets “all look really good.”

Similarly, the airline’s COO, Andrew Watterson, said that customer response to assigned seating and extra legroom (premium) offerings has been “overwhelmingly positive.”

It’s an interesting outcome for Southwest, which had for decades seen its resistance to these industry-wide practices as essential to its customer loyalty and revenue. Now, the “K-shaped economy” is becoming increasingly visible in travel trends at US airlines.

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Constellation, Talen, and NRG surge as BNP analysts see “golden (AI)ge” ahead for them

Power producers Talen Energy, Constellation Energy, and NRG jumped Wednesday, benefiting in part from a rosy write-up by analysts at BNP Paribas, who launched coverage of all three at “outperform” and argued that the AI energy trade — a big AI-related winner in recent years that has lagged a bit recently — is due for a second wind.

That view was in a broad note on the independent power producer segment of utilities industry that the analysts published Wednesday, titled “The Golden (AI)ge of IPPs.”

Here’s the gist of it:

US independent power producers (IPPs) have lagged the AI basket for 6+ months, after garnering much attention in 2023-1H25. Investors are caught up in the minutia of perceived headwinds: underwhelming pace of power purchase agreement deals, distributed behind-the-meter solutions stealing the ‘time-to-power’ edge, pressure for data centers to bring generation and not tighten the grid, etc.

And yet, as we demonstrate, despite all this noise, the wave of rising load is at the cusp of an acceleration that will nonetheless overwhelm new supply—well into the 2030s, in our view. Hop on or risk missing the resurgent AI trade this decade.

BNP’s price targets for the stocks — Constellation ($407), NRG ($232) and Talen ($549) — implied gains of 32%, 50%, and 68% respectively. (Though today’s gains would reduce those potential upside targets somewhat for new buyers.)

US independent power producers (IPPs) have lagged the AI basket for 6+ months, after garnering much attention in 2023-1H25. Investors are caught up in the minutia of perceived headwinds: underwhelming pace of power purchase agreement deals, distributed behind-the-meter solutions stealing the ‘time-to-power’ edge, pressure for data centers to bring generation and not tighten the grid, etc.

And yet, as we demonstrate, despite all this noise, the wave of rising load is at the cusp of an acceleration that will nonetheless overwhelm new supply—well into the 2030s, in our view. Hop on or risk missing the resurgent AI trade this decade.

BNP’s price targets for the stocks — Constellation ($407), NRG ($232) and Talen ($549) — implied gains of 32%, 50%, and 68% respectively. (Though today’s gains would reduce those potential upside targets somewhat for new buyers.)

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