Market Overview

Southwest Airlines Lowers ASM Growth Guidance

Southwest Airlines Lowers ASM Growth Guidance

Shares of Southwest Airlines Co (NYSE: LUV) traded marginally lower Wednesday morning after management revised its revenue outlook lower.

What Happened

Southwest lowered its revenue per available seat growth from 3-4 percent to a new range of 2-3 percent for the first quarter. The revision follows the company's move to ground all of its Boeing Co (NYSE: BA)'s 737 MAX 8 aircraft in reaction to two recent plane crashes.

Management expects capacity to grow by just 1 percent, which marks a revision from its prior guidance of 3.5 percent to 4 percent.

From mid-February through the end of March, the company expects to have canceled around 9,400 flights due to the grounding of the 737 MAX planes, unscheduled maintenance disruptions and weather issues.

Why It's Important

The company did say it expects revenue to pick up in the second quarter based on existing booking and revenue trends. However, a 737 MAX the company was flying to a storing facility declared an emergency after takeoff in Orlando and forced to return, CNBC reported. While the company said the emergency was due to an engine problem, any new issues with the 737 MAX could have an incremental negative impact on future demand.

What's Next

Southwest is scheduled to report its first quarter results before market open on April 25.

The stock traded around $48.47 per share at time of publication.

Related Links:

Argus Downgrades Boeing On Near-Term 737 Max Risk

Barclays Fastens Seat Belt for Earnings Growth For Spirit, But Sees Shorter Runway For JetBlue


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