The company raised guidance, and offered an upbeat outlook.

Southwest Airlines (LUV 5.42%) raised its third-quarter forecast today and announced a series of steps designed to revitalize its business model. Investors are climbing on board, sending Southwest shares up as much as 11.4% on the day, and up 7.6% as of 1 p.m. ET.

Building a better airline

Southwest is an airline pioneer, but the company has been flying through turbulence in recent years. The shares have lost more than 40% of their value over the past five years, and earlier this year activist Elliott Management called for a shakeup at the company.

On Thursday, Southwest unveiled its plan to course-correct on its own. The company, as expected, said it will begin selling assigned seating in the second half of 2025, including add-ons such as premium seating and boarding upgrades.

The airline is also in the process of beefing up global partnerships and intends to streamline operations.

“We’re now ushering in a new era at Southwest, moving swiftly and deliberately to transform the company by elevating the customer experience, improving financial performance, and driving sustainable shareholder value,” CEO Bob Jordan said in a statement.

The changes will take time to implement, but Southwest also offered some near-term reason for optimism. The company raised its third-quarter revenue forecast to up 3%, better than the previous 2% decline, and announced a new $2.5 billion share repurchase plan.

Southwest also appointed Bob Fornaro, who was CEO of AirTran Holdings when Southwest acquired it, to the company’s board of directors.

Is Southwest stock a buy?

Southwest has a strong brand and the size and scale to be a dominant force in the airline industry. The issue has been a business model that has not kept up with the times, and Jordan’s moves should help address that issue.

Unfortunately for investors, this turnaround will take time. Some of the moves Southwest is announcing today will not really pay off until early 2026. There is potential here, but investors need to be aware there could be a long wait.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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