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Southwest Airlines Co. (LUV)

  • Sat, Jun. 20, 2:45 PM
    • Airlines stocks are poised for a breakout as the reality of improved profits overrides concerns on capacity growth, reasons Barron's Jack Hough.
    • The publication mirrors the view of many SA commenters that there's a disconnect between valuations in the sector and the degree to which lower jet fuel prices continue to prime operating earnings.
    • Take for example no-hedging American Airlines Group (NASDAQ:AAL) which is estimated to save $4B a year from the lower level of jet fuel prices. Other airlines are peeling off some hedges to reap a bigger fuel benefit each quarter.
    • Efficiency for U.S. airlines is still solid with a majority of airlines reporting load factors of 80% or higher, although increased competition in some markets has pushed key metric RASM lower. The most recent read on fares came in positive.
    • Also in the mix is the continued growth of service fees and consolidation benefits from mergers by legacy carriers.
    • P-E ratios of below 12 (based off of 2015 estimates) are common in the sector giving investors something of a value play. Republic Airways (NASDAQ:RJET) can be nabbed with a forward earnings multiple of 6.48. JetBlue (NASDAQ:JBLU) is up 27% YTD, but only trades with a 10.5 P-E collar.
    • Barron's identifies American Airlines Group, Delta Air Lines (NYSE:DAL), United Continental (NYSE:UAL), and Southwest Airlines (NYSE:LUV) as four stocks that could rise 15% to 50% over the next year. If the view on the sector is spot-on - JetBlue, Virgin America (NASDAQ:VA), Hawaiian Holdings (NASDAQ:HA), Spirit Airlines (NASDAQ:SAVE), Republic Airways, Allegiant Travel (NASDAQ:ALGT), SkyWest (NASDAQ:SKYW),  and Alaska Airlines Group (NYSE:ALK) should also put in gains.
    • Related ETFs: JETS
    | Sat, Jun. 20, 2:45 PM | 37 Comments
  • Thu, Jun. 18, 11:26 AM
    • There's a major fight going in on in Dallas over Love Field involving major carriers, the DOT, and the city.
    • On one side Virgin America (VA +2.1%) and Southwest Airlines (LUV -1.3%) want to see Delta Air Line (DAL +0.4%) pushed out of the airport when its agreement with Southwest expires on July 9.
    • The DOT has mandated that Southwest continue to carve out slots for Delta.
    • American Airlines Group (AAL +0.4%) is shouldering into the controversy looking for space to add AA flights.
    • The City of Dallas is looking to stay neutral, but has included all the parties in a lawsuit asking a federal judge to make a ruling.
    | Thu, Jun. 18, 11:26 AM | 3 Comments
  • Thu, Jun. 18, 9:41 AM
    • Southwest Airlines (LUV -1.2%) slips after Barclays singles the company out for a higher level of margin risk than peers.
    • The carrier is pushing into longer-haul markets and larger metropolitan areas where its model is seen as a "hit or miss" proposition.
    • BarCap downgrades Southwest two notches to Underweight.
    | Thu, Jun. 18, 9:41 AM | 5 Comments
  • Thu, Jun. 18, 9:06 AM
    • Airline fares rose 5.7% in May on a seasonally adjusted basis, according to the Bureau of Labor Statistics.
    • The average fare was still down 6.6% from last year on an unadjusted basis after the sector ran off a string of months with decreases.
    • Fares fell 1.3% in April and 1.7% in March.
    • If the bump in fares extends it could alleviate some concerns in the industry over capacity growth.
    • Related stocks: LUV, UAL, DAL, AAL, JBLU, ALK, HA, SAVE, ALGT, RJET, VA, SKYW.
    • BLS CPI data
    | Thu, Jun. 18, 9:06 AM | 14 Comments
  • Wed, Jun. 10, 1:26 PM
    • JPMorgan's Jamie Baker thinks fear in the airline sector over capacity growth isn't based on historical precedence.
    • The analyst points to prior periods when capacity growth led to improved revenue metrics.
    • The gain in revenue from extra seats counterbalances the risk carriers will need to drop prices, he reasons.
    • Baker adjust his price targets in the sector based on the current level of pessimism while holding firm on a long-term bullish view.
    • JP's PT changes: Delta Air Lines (NYSE:DAL) to $63 from $72, American Airlines Group (NASDAQ:AAL) to $72.50 from $84.50, United Continental (NYSE:UAL) to $78.50 from $89, Southwest Airlines (NYSE:LUV) to $42.50 from $52.
    • Previously: IATA raises global airlines profit outlook (June 8)
    • Previously: Airline stocks grounded on capacity concerns (June 9)
    | Wed, Jun. 10, 1:26 PM | 44 Comments
  • Wed, Jun. 10, 10:30 AM
    • The EPA says greenhouse gases from aircraft endanger human health, a finding that begins a process to regulate greenhouse gas emissions from the aviation industry, the latest sector to be regulated under the Clean Air Act after cars, trucks and power plants.
    • The endangerment finding allows the EPA to implement domestically a global carbon dioxide emissions standard being developed by the International Civil Aviation Organization; the airline industry favors a global standard over individual national standards since airlines operate all over the world and want to avoid a patchwork of rules and measures.
    • GEVO, which has been working on renewable fuels for airplanes, is +3.5% today and +27% so far this month in anticipation of the EPA findings.
    • Also higher are REGI +2%, SZYM +2.5%, AMRS +2%.
    • Potential related stocks: AAL, UAL, SAVE, DAL, ALK, HA, SKYW, LUV, JBLU, VA
    | Wed, Jun. 10, 10:30 AM | 19 Comments
  • Tue, Jun. 9, 10:58 AM
    • The jittery airline sector is having a volatile day once again.
    • Capacity concerns have been the major focus of sellers, although the strong move higher of oil prices today is also in the background.
    • American Airlines Group reported a drop in its load factor earlier as capacity growth came in ahead of revenue passenger miles.
    • Though Raymond James issued a biting downgrade on American, United Continental, and Delta yesterday - some analysts such as Sterne Agee CRT's Michael Derchin think the pessimism is overdone.
    • Q2 conference calls could calm fears on capacity running hot, reasons the analyst.
    • A higher level of buybacks in the sector and reasonable valuations based on earnings projections are also factors.
    • Sector watch: Alaska Air Group (ALK -6.4%), Southwest Airlines (LUV -5.8%), SkyWest (SKYW -3.4%), Hawaiian Holdings (HA -4.7%), Spirit Airline (SAVE -4.4%), Delta Air Lines (DAL -3.7%), Allegiant Travel (ALGT -3.6%), Republic Airways (RJET -2.9%), Virgin America (VA -2.6%), United Continental (UAL -1.8%), American Airlines Group (AAL -2%), JetBlue (JBLU -1.9%).
    • The U.S. Global Jets ETF (NYSE:JETS) is down 2.96% on the day.
    • Previously: American Airlines Group's capacity up 2% in May
    | Tue, Jun. 9, 10:58 AM | 19 Comments
  • Mon, Jun. 8, 9:33 AM
    | Mon, Jun. 8, 9:33 AM | 26 Comments
  • Thu, Jun. 4, 1:00 PM
    | Thu, Jun. 4, 1:00 PM | 5 Comments
  • Mon, Jun. 1, 3:56 PM
    • Southwest Airlines (LUV +2.3%) CEO Gary Kelly brought some cheer to the airline sector when he told Bloomberg TV it will increase capacity this year at a 7% rate - instead of the 8% pace tipped off last month.
    • "We’re going to make sure we manage accordingly to the low end of the range. That should address some of the concerns of our investors,” said Kelly.
    • Alaska Air Group (ALK +2.2%), American Airlines Group (AAL +4.3%), Delta Air Lines (DAL +3.4%), and United Continental (UAL +3.2%) all reacted positively to the cautious stance from Southwest.
    | Mon, Jun. 1, 3:56 PM | 23 Comments
  • Sat, May 30, 10:43 AM
    • The airline sector has been rattled this month by an indication from Southwest Airlines of a slight increase in capacity and some RevPAR tallies below expectations.
    • Concerns on pricing and capacity have held back some analysts from setting higher price targets on the group for the next year.
    • Over the last year, most airline stocks have showed a high degree of correlation with oil prices despite all the other factors that impact profits in the sector.
    • Southwest Airlines (NYSE:LUV), United Continental (NYSE:UAL), Alaska Airlines Group (NYSE:ALK), and Allegiant Travel (NASDAQ:ALGT) all had a correlation coefficient of -0.90 or lower between their daily closing share price and the level of oil. A mark of -1.0 indicates perfect negative correlation - while 0.0 indicates no correlation and +1.0 is perfect positive correlation.
    • American Airlines Group (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), JetBlue (NASDAQ:JBLU), Republic Airways (NASDAQ:RJET), and Hawaiian Airlines (NASDAQ:HA) were all at -0.80 or lower.
    • Over a shorter period due to its IPO launch, the correlation coefficient on Virgin America (NASDAQ:VA) vs. oil came in at -0.733.
    • The U.S. carriers marching with the most independence from oil prices were Spirit Airlines (NASDAQ:SAVE) at -0.622 and SkyWest (NASDAQ:SKYW) at -0.701.
    • Pricing data and correlation coefficients
    | Sat, May 30, 10:43 AM | 16 Comments
  • Tue, May 26, 9:57 PM
    • Airline stocks stretched their losing streak to six sessions today, the longest such stretch since last October and the worst cumulative showing (-8.8%) since shedding 10.9%, also in October.
    • Analysts cite pressure from concerns over capacity growth and the resulting lack of pricing power, as well as a May spike in west coast jet fuel prices due to several unscheduled refinery outages; "jet fuel assumptions at airlines may have to be raised due to the high cost of refining jet fuel on the west coast," Cowen's Helane Becker says.
    • Even as he remains somewhat bullish on the stocks, UBS analyst Darryl Genovesi today cut his earnings estimates this year and next for American (NASDAQ:AAL), Delta (NYSE:DAL) and Alaska Air (NYSE:ALK), and lowered his estimate for Southwest (NYSE:LUV) earnings this year and United (NYSE:UAL) in 2016.
    • Among some of the more active airline stocks, DAL has fallen 11%, JetBlue (NASDAQ:JBLU) has shed 8.7%, AAL has plunged 15%, and LUV has sunk 14% over the past six sessions.
    • ETFs: IYT, JETS
    | Tue, May 26, 9:57 PM | 23 Comments
  • Fri, May 22, 9:02 AM
    | Fri, May 22, 9:02 AM | 14 Comments
  • Wed, May 20, 5:52 PM
    • Aggressive positioning by airlines this week has led to some sharp share prices declines.
    • American Airlines indicated it would match lower fares from peers, while Southwest Airlines added capacity on some key routes.
    • Lower oil prices and stronger demand in the business segment has sparked some of the capacity growth.
    • Airline stocks: LUV, AAL, DAL, JBLU, SAVE, ALK, HA, VA, RJET, UAL.
    • Related ETF: JETS.
    | Wed, May 20, 5:52 PM | 30 Comments
  • Wed, May 20, 10:42 AM
    • Airline stocks are making a strong move lower after oil prices react to supply data out of the U.S. and Japan along with renewed tension in Yemen.
    • Some sector analysts have noted the swings in airline share prices (up/down) are outsized compared to the impact on jet fuel prices of daily developments in the crude oil market.
    • Platts has a breakdown of how supply and demand forces in the jet fuel market bring other factors into play.
    • Leading airline decliners: Southwest Airlines (LUV -6.8%), American Airlines Group (AAL -6.1%), JetBlue (JBLU -6.3%), United Continental (UAL -6%), Spirit Airline (SAVE -5.3%), Delta Air Lines (DAL -4.9%), Alaska Air Group (ALK -3.9%), Hawaiian Holdings (HA -4.6%), Republic Airways (RJET -3.5%), Allegiant Travel (ALGT -3.8%).
    • Related ETFs: JETS.
    | Wed, May 20, 10:42 AM | 60 Comments
  • Mon, May 18, 5:24 AM
    | Mon, May 18, 5:24 AM | 20 Comments
Company Description
Southwest Airlines Co is an operator of passenger airline that provides scheduled air transportation in the United States and international markets.
Sector: Services
Country: United States