![]() Image Courtesy of Southwest Airlines Southwest Business Select If looking to fly to or from any of these destinations, you will need to fly with another airline. states: Alaska, Delaware, New Jersey, North Dakota, South Dakota, Vermont, West Virginia, and Wyoming. It's also important to note that Southwest does not serve these U.S. Southwest Airlines does not currently fly to Europe, Asia, South America, or Africa. Southwest Airlines exclusively operates Boeing 737 planes, and they are the largest operator of Boeing 737 planes worldwide. states, as well as Puerto Rico, Mexico, and destinations in the Caribbean and Central America. Headquartered in Dallas, Texas, Southwest Airlines flies to 42 U.S. airline offering competitive, low-cost fares to over 100 domestic destinations and 10 countries. Since then, Southwest Airlines has grown to become a major U.S. The airline originally only served three airports in the state of Texas. What we know today as Southwest Airlines started back in 1967 when it was incorporated as an intrastate airline called Air Southwest. Image Courtesy of Southwest Airlines What is Southwest Airlines? The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines. On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. Strong operations are a positive, not a negative. Some suggest that it should now be punished because valuations are stretched. The airline has been given a lot of leeway throughout the pandemic because it is strong operationally. But even so, the overall thrust is positive. Other analysts have downgraded LUV stock recently. Otherwise, investors are left with a well-respected stock that has 28% upside based on analysts’ consensus prices. That’s a bet worth taking because if it’s correct, LUV stock jumps. So one question will become how effective was Southwest’s fuel hedging strategy? Takeaway April’s bad start won’t be added to that tally. That was based on 5,600 canceled flights through January. However, Southwest already provided first-quarter revenue guidance with an expectation of 45-55% lower revenue compared to Q1 ‘19. At that time its current and non-current obligations totaled $10.7 billion. The airline ended 2021 with $16.5 billion in liquidity. The same was true of the fourth quarter for the firm.īasically, Southwest isn’t in any danger now. That was a massive improvement over 2020 in which it lost $3.074 billion. It posted a modest net income of $977 million throughout 2021. Southwest is still among the best airline stocks. Other airlines were affected so revenues will drop wholesale but LUV stock got dinged particularly hard. However, Southwest was hit the worst because it is the largest domestic carrier. On the one hand, the snarled traffic is merely two days out of the year. It canceled an additional 400 flights on Sunday. That equated to 14% of flights becoming cancellations and 44% of flights being delayed. Southwest had to cancel 600 flights on Saturday and delay 1,500 more. Unfortunately, Southwest suffered a disproportionate portion of the trouble. Those thunderstorms caused 1,900 flights to be canceled on Saturday with an additional 1,500 canceled on Sunday. Thunderstorms over a large portion of Florida bungled flights across Florida over the first weekend in April. That said, Southwest was hit particularly hard by recent issues affecting airlines at large. In other words, it likely has a significant advantage over unhedged airlines including United (NASDAQ: UAL) and Delta (NYSE: DAL). Indications are that Southwest is 64% hedged for the remainder of 2022. So when they spike unexpectedly the firm will be able to buy fuel at much lower prices. It agrees to purchase fuel at pre-set prices months and years in advance. The firm is a big proponent of fuel hedging. But there’s good news among all of the negative: Southwest has long practiced a strategy that should help it now. That was prior to the invasion of Ukraine. The company already raised guidance for fuel costs per gallon by 20 cents when it released earnings in late January. Brent crude is hovering around $100 now but those prices peaked above $130 in early March. Airlines went through a restructuring back in 2008 when oil shot up above $145 per barrel. And history suggests that such a period is very detrimental to the airline industry. With Russia invading Ukraine, that is precisely what has happened.
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