The airline announced the seismic change to its business model Thursday alongside a new premium-class option and plans for redeye flights. While Southwest indicated earlier this year that it was reconsidering the seating policy, it’s now facing heightened pressure to revamp underperforming operations from activist investor Elliott Investment Management.

The steps represent a strategic shift for the carrier, which has steadfastly maintained open seating while other airlines raked in revenue by charging extra for more-desirable seats. That unfulfilled opportunity is a major tenet of Elliott’s campaign — that Southwest has refused to modernize its business to appeal to today’s travelers.

Adoption of premium seating could open the door for the carrier — which has long appealed primarily to leisure travelers — to potentially offer business- and first-class sections in the future.

Southwest still won’t charge for checked bags. The “bags fly free” policy has been a focal point of Southwest promotions and advertisements, and some analysts have speculated charging for bags could cost the airline customers. It’s the only US carrier that doesn’t impose fees to check two.

Southwest will begin offering assigned seats and premium seating with more legroom next year. It will start flying overnight, cross-country routes on Feb. 13. Those flights are for sale from Las Vegas, Los Angeles and Phoenix to Baltimore/Washington International Thurgood Marshall Airport; Las Vegas to Orlando; and Los Angeles to Nashville.

Details on which seats will carry fees and the extra cost are still being decided, Southwest said. All seats will be assigned, but there won’t be a separate cabin for premium offerings. The carrier has studied various seating options in the past, but always rejected a shift to assigned spots, saying passengers didn’t support such a move.

Recent Changes

While Southwest has long stood by some of its central policies, it hasn’t been entirely resistant to change. It began routes to nearby international destinations and, more recently, added flights to Hawaii. The airline previously revamped its boarding system, offered early boarding options at an additional cost and developed a corporate booking tool to win more business travelers.

Southwest said in April that it had begun evaluating premium products and others changes, well before Elliott disclosed a $1.9 billion stake last month. But until Thursday, the airline said it wouldn’t disclose any details until an investor meeting slated for September. 

Elliott wants to oust Chief Executive Officer Bob Jordan and Chairman Gary Kelly for poor execution and a “stubborn unwillingness to evolve the company’s strategy.” They are “not up to the task of modernizing Southwest,” the activist has said.

Southwest earlier this month named a veteran airline industry executive to its board to help address other concerns raised by Elliott. The carrier also adopted a “poison pill” shareholder rights plan to discourage the activist from gaining a larger share.