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Southwest Airlines (LUV), which is currently embroiled in a proxy fight with activist investment firm Elliott Management, has faced plenty of turbulence this year, but the stock is flying higher today after the budget carrier released its transformational plan and other updates ahead of its Investor Day. The beleaguered airline had positive news to share on both a near-term basis, including upwardly revised Q3 RASM guidance of +2-3%, and a longer-term basis, such as its plan to generate an additional $4.0 bln in EBIT by 2027.

• Due to LUV's lack of international flights and its no-frills service, the company has not been able to fully capitalize on the robust travel demand and the most profitable trends within the commercial airline industry, such as higher-income passengers upgrading to premium cabins. This has put LUV at a major disadvantage relative to competitors like United Airlines (UAL), American Airlines (AAL), and Delta Airlines (DAL).
• However, in Q3, the tables turned a bit in LUV's favor as the CrowdStrike (CRWD) outage in July sent stranded passengers scrambling to find flights on LUV -- which doesn't rely on CRWD's cybersecurity systems. This event, combined with improving demand trends in general, allowed LUV to nudge its Q3 RASM outlook higher to +2-3% from its prior forecast of flat to -2%.
• More importantly, though, the big picture for LUV has brightened after the company revealed a series of actions that it believes will enable it to generate the best-in-class profits that it once was known for. After posting operating margins of 5.5% in Q2, badly lagging behind the 14.7% for DAL and the 13.1% for UAL, the company has some serious ground to make up.
• Perhaps the biggest change is that for the first time in its history LUV will begin selling assigned seats, starting in 2H25. Some of those seats will be premium seats with additional legroom, providing LUV with a new high-margin revenue stream. 
• New redeye flights to certain markets will also be added this coming February, providing customers with more flight options, while simultaneously optimizing aircraft utilization.
• On the cost side, LUV intends to minimize hiring over the next couple of years as it also optimizes scheduling efficiency and capitalizes on supply chain opportunities. In total, the company expects to reduce average aircraft capital expenditures to approximately $500 mln through 2027.

As an added bonus, LUV also announced a new $2.5 bln share repurchase program this morning. Whether these efforts are enough to stave off Elliott Management's demand for an overhaul of LUV's Board of Directors remains to be seen -- the activist investor had called for a special shareholder meeting in the coming weeks -- but the company's other shareholders are clearly applauding the moves.