Southwest Airlines on Wednesday forecast a surge in 2026 profits well above analysts’ expectations as the carrier overhauls its half-century-old business model to include new moneymakers like bag fees and seat assignments.

The airline expects to earn at minimum, an adjusted $4 a share this year, exceeding the $3.19 analysts had anticipated, according to estimates from LSEG. It also forecast capacity growth of 2% to 3% compared with 2025, which could almost double last year’s capacity expansion.

“We wanted to give a little more time before we gave the upper bound of this forecast just to let a little more information come in” about the new initiatives, CFO Tom Doxey said in an interview Wednesday. He said travel demand has been strong.

Southwest stock rose more than 5% in post-market trading after the company’s report.

In the first quarter, Southwest said it expects revenue per seat mile to rise 9.5%, above the 8.5% analysts expected. The carrier forecast adjusted earnings of 45 cents for the first quarter, above the 33 cents Wall Street projected.

“Notwithstanding the impact of Winter Storm Fern, 2026 is off to a strong start, driven by the Company’s Customer-focused product offering, operational excellence, and dramatic progress from the transformational initiatives implemented last year,” CEO Bob Jordan said in an earnings release. The sprawling winter storm forced airlines to cancel thousands of flights, though Southwest’s Texas rival American Airlines has especially struggled to recover from the weather impacts.

Here’s how the company performed in fourth quarter compared with Wall Street expectations, according to consensus estimates from LSEG:

• Earnings per share: 58 cents adjusted vs. 58 cents cents expected
• Revenue: $7.44 billion vs. $7.51 billion expected

Southwest has spent much of the past two years making drastic changes to its business model, including ending its open boarding policy and this week moving to assigned seats, which come with upcharges for certain spots, including its new extra legroom section.

Last year, the airline began charging customers to check bags for the first time ever and launched basic economy fares. The policies make the longtime industry standout more like its rivals as the airline faces pressure to improve profits.

“We’re not done,” Doxey said Wednesday about the airline’s initiatives. The carriers’ executives have previously discussed the possibiliyt of other ventures. Jordan said in an interview last month that Southwest is exploring airport lounges.

Southwest’s executives are set to face questions from investors in a call on Thursday morning about the cost of the storm, new revenue streams and growth in profits in the coming years, beyond the sales spike from their debut.

Southwest’s fourth-quarter net income rose almost 24% from a year earlier to $323 million, while revenue rose 7.4% to $7.44 billion. Adjusting for one-time items including a reorganization, Southwest posted earnings of $301 million or 58 cents a share, down from $356 million or 56 cents a share a year earlier.