Southwest Airlines (LUV) announced Thursday that it will get rid of open seating in a sweeping change from its decades-long practice. Instead, it will begin assigning seats and offer premium seating with extra leg room.
Shares of the domestic carrier gained more than 5.5% on Thursday.
Southwest CEO Bob Jordan said, "Our implementation of assigned and premium seating is part of an ongoing and comprehensive upgrade to the Customer Experience, one that research shows Customers overwhelmingly prefer."
The low-fare airline has had a tradition of open seating for more than 50 years. Customers taking longer flights preferred assigned seats, according to Southwest.
Airlines can also charge more for assigned and premium seating, enabling them to boost profits.
But CFRA equity analyst Zachary Warring didn't seem convinced the airline's declining margins would be helped by the seating change.
"The company announced the end of its open seating policy in a move to turn around its margin problem, but we believe may upset its customer base," Warring wrote on Thursday morning.
"We remain neutral on shares as we believe the U.S. consumer is showing signs of cracking while capacity remains elevated while LUV's multiple remains elevated," he added.
The changes come amid pressure from activist investor Elliott Management, who earlier this month warned of a proxy fight as it seeks a "new, truly independent" board of directors.
Southwest also announced it will introduce overnight, redeye flights, with the first routes starting on Valentine's Day in 2025.
The carrier also posted its quarterly results on Thursday. Adjusted earnings per share came in at $0.58 versus Wall Street estimates of $0.51. Revenue came in at $7.35 billion versus $7.33 billion expected by analysts.
Increased competition and higher labor costs have weighed on domestic carrier's profits. Airlines have been forced to cut fares in order to compete amid increased capacity.
American Airlines (AAL) cut its forecast on Thursday, sending shares of the air carrier down 5%.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.