It’s the end of budget airlines as we know them [Video]

Budget airlines are upending many of their original business plans as increased costs wreak havoc on their bottom lines.

On Thursday, Southwest Airlines announced the end of its open-seating policy, a 50-year practice of letting passengers choose their seats based on their boarding order versus having them assigned.

Instead, the airline will follow most other airlines in the world by assigning seats and offering premium options on all its flights, saying internal research found the vast majority of customers preferred this system. It plans to announce more details in September.

The move was an expected but nonetheless stunning reversal by perhaps the last remaining low-cost US airline that had thus far resisted many competitors’ changes.

But industry conditions, such as higher labor and fuel costs and overcapacity, mean airlines like Southwest are struggling with reduced profits despite record travel demand — forcing them to seek alternative revenue opportunities.

Savanthi Syth, an airlines analyst at Raymond James, estimated in June that paid seat assignments could generate between $600 …