UBS upgrades Southwest, sees earnings boost from seating and bag fee initiatives

Sam Boughedda

Tue, February 17, 2026 at 10:26 PM GMT+9 1 min read

In this article:

LUV

+0.55%

UBS

-0.64%

Investing.com – UBS has upgraded Southwest Airlines to Buy from Neutral, arguing that new seating and fee initiatives could drive a sharp jump in profitability over the next two years.

Analyst Atul Maheswari said UBS now sees “upside potential from ELR/assigned seating initiatives,” lifting its price target to $73 from $51.

UBS’s base-case analysis suggests the combination of extra legroom (ELR), assigned seating and checked bag fees could add approximately $4.25 to $4.50 in incremental EPS once the initiatives reach full maturity in fiscal 2027.

Maheswari wrote that these drivers “alone [will] drive the majority of our estimated EPS growth from less than $1 in FY’25 to $6+ for FY’27.”

The firm expects Southwest to reflect that upside when it provides the upper end of its fiscal 2026 outlook, noting that the airline currently guides to at least $4. UBS said presenting a higher range “should act as a positive catalyst.”

UBS now forecasts EPS of $5.05 for 2026 and $6.07 for 2027, with estimates roughly 20% above consensus.

The report also highlighted stronger-than-expected revenue potential from Southwest’s cabin overhaul.

UBS feels the new configuration implies about 28% ELR seats and 22% preferred seats, and that even a “40% paid load factor on ELR seats & 70% on preferred seats” could generate “$1.7bn in additional EBIT or ~$2.70 in EPS” by 2027.

UBS also said bag fees represent a “sizeable opportunity,” estimating $1 billion to $1.5 billion in incremental EBIT depending on adoption rates.

Related articles

UBS upgrades Southwest, sees earnings boost from seating and bag fee initiatives

These 2 stocks are best positioned to benefit from higher uranium prices: analyst

JPMorgan outlines ten strategic themes that could shape the outlook for 2026

Terms and Privacy Policy

Privacy Dashboard

More Info