Southwest Airlines Co (NYSE:LUV) shares gained more than 10% after the airline raised its third quarter forecast for revenue per available seat mile and announced a $2.5 billion share repurchase program.
The airline now expects revenue per available seat mile, which reflects pricing power, to increase between 2% to 3% in Q3, compared with its earlier expectation of flat to 2% growth.
Ahead of its Investor Day event in Dallas, the airline also outlined its three-year strategic plan, which features the introduction of assigned seating by mid-2026 and premium seating options to offer extra legroom.
It also said it will formalize global airline partnerships starting with Icelandair in 2025 and will introduce redeye flights and optimize flight times to improve productivity.
By 2027, it projects approximately $4 billion in cumulative incremental earnings before interest and taxes (EBIT) and an after-tax return on invested capital (ROIC) of 15% or greater, well above the weighted average cost of capital.
"The strategic vision announced today is designed to return us to financial prosperity and drive value creation," chief financial officer Tammy Romo commented.
Shares of Southwest added 10.6% at about $31 late morning on Thursday.
Its update also buoyed its airline industry peers, with American Airlines Group Inc (NASDAQ:AAL, ETR:A1G) adding 7.5%, United Airlines Holdings Inc (NASDAQ:UAL, ETR:UAL1) up 6.4%, and Delta Air Lines Inc (NYSE:DAL) up 5.2%.