Southwest Airlines‘ profit fell 42% in the first nine months of the year compared with the same period in 2024. But its stock has been on a tear.

Shares of Southwest are up nearly 24% so far in 2025, more than any other U.S. passenger carrier. Industry profit leaders Delta Air Lines and United Airlines have risen about 17% each this year.

Southwest stock this week hit a 2½ year high. Analysts and investors have high hopes for the carrier next year, when it completes its planned transformation from a one-size-all-fits airline to one that looks more like its larger rivals.

“What’s helping Southwest’s stock is clearly the initiatives, not the [demand] environment, because if it was you’d see it in all the other stocks as well,” said Savanthi Syth, airline analyst at Raymond James.

Starting Jan. 27, Southwest is ditching open seating and moving to assigned seats on its all-Boeing 737 fleet. The first rows of seats have extra legroom — for a fee. Seat prices vary, but, for example, a Baltimore to Las Vegas flight in early February showed the seats going for about $80 each way.

Southwest in October forecast that assigned seating and extra legroom seats could drive $1 billion in pretax earnings next year and $1.5 billion in pretax earnings in 2027.

“Because the assigned seating, the extra legroom, kicks in and there’s a lot of value in that, of course, [results are] going to be better year over year,” Southwest CEO Bob Jordan told CNBC on Dec. 10. “The bookings that we’re seeing reflect the business case for assigned seating and extra legroom.”

Barclays upgraded Southwest’s stock earlier this month, with transportation analyst Brandon Oglenski forecasting Southwest’s adjusted earnings will be above $4 per share next year and surpass $6 per share in 2027.

The end of the cattle call boarding lineup comes months after the Dallas carrier got rid of another decades-old policy: two free checked bags for customers. It also started selling its first-ever no-frills basic economy fares.

Southwest, like other airlines, cut its profit forecast for 2025 after demand dipped early this year as President Donald Trump‘s tariffs and cost cutting in Washington weighed on bookings. More recently, the government shutdown that ended last month hurt demand prompting Southwest to again lower its earnings outlook for the year.

Southwest typically provides its yearly outlook alongside the previous year’s earnings in late January.