8/16/2023 0 Comments Southwest airlines stock priceSince the 2016 low at $27/barrel, oil has spiked to $68/barrel again. But we’ll have to see if they have the skill to avoid the fallout from another big price spike. Southwest famously beat the other airlines in a big way during the pre-Great Financial Crisis era due to its extensive and shrewd fuel price hedging strategy as oil shot the moon. Southwest has another problem: crude oil is soaring. Additionally, Southwest’s planned further expansion into Mexico could hit turbulence if the Mexican socialist candidate (currently up in the polls) wins their presidential election this summer. When they get into a fare war with your airline, prices are heading much lower. They’re often cheaper than buses on their Mexican domestic routes. Volaris, for example, has the lowest cost per mile of any carrier in all of the Americas. Keep in mind that the non-US carriers have a major advantage in labor costs. This is problematic for LUV stock, since all the competition is bound to drive down fares. Mexico’s third discounter, Interjet, has also expanded its Mexico-US flight offerings. They also recently launched Volaris Costa Rica to bring lower fares to Central America-US routes. The Viva family of carriers is backed by Europe’s dominant low-cost carrier Ryanair Holdings plc (ADR) (NASDAQ: RYAAY). This includes VivaAerobus in Mexico and VivaColombia - both of which have launched flights to the US. All three of those airlines have made aggressive plays internationally.Īnd now Mexico and Central America are bringing their own competition to the US market. Mexican carrier Volaris (NASDAQ: VLRS) has arguably been most aggressive on cross-border flights. But these routes are starting to get saturated. International Competitionįor a long time, south-of-the-border flights have been a significant profit center for US non-traditional airlines such as JetBlue Airways Corporation (NASDAQ: JBLU) and Spirit Airways Incorporated (NASDAQ: SAVE) along with Southwest. Expect Southwest’s earnings to be a little softer over the next couple of quarters as a few passengers choose other airlines for their flights. But the media impact of a fatal crash tends to linger for awhile. The company has given $5,000 vouchers to all the passengers on board, which is a good step. What we do know is that this will be a reputational blow for Southwest and LUV stock. Government investigations into this sort of matter tend to take awhile. Other people pulled her back in, but she later died.Īt this point, it is unclear if Southwest is more at fault, or the engine makers, which includes the likes of General Electric Company (NYSE: GE). Tragically, the explosion was so great that the damage broke a window and almost sucked a passenger out of the cabin. On April 17, Southwest Flight 1380 was forced to make an emergency landing after one of the plane’s engines exploded in flight. The company recently had a fatal crash, oil prices are spiking and its international routes are facing more competition. But 2018 may not be such a good year for Southwest’s investors. So, give management its due, it’s avoided the usual pitfalls of the airline industry. An investor in LUV stock over the past 20 years has made a total return of 533% - not bad for an airline stock. Southwest Airlines (NYSE: LUV) is the United States’ best example. Warren Buffett famously said that “if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.” Fortunately, a couple of airline stocks have managed to avoid bankruptcy and make their shareholders major bucks over the years. Airlines have historically made for terrible investments.
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