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Southwest Airlines Falls after It Cuts Unit Revenue Outlook

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Southwest cuts unit revenue outlook

Southwest Airlines (LUV) stock was down 3.5% before markets opened today after the company lowered its first-quarter unit revenue outlook. In a regulatory filing today, Southwest revealed that the US government shutdown would hurt its revenue more than it had expected.

The fourth-largest US airline by passenger traffic now forecasts the January 1–January 23 shutdown will hurt its first-quarter revenue by $60 million, up from $10 million–$15 million. The company has also lowered its unit revenue growth outlook for the quarter to 3%–4% from 4%–5%. Unit revenue measures passenger fares. Other major US airline (IYT) stocks Delta Air Lines (DAL), American Airlines (AAL), and Hawaiian Holdings (HA) were also down this morning, by ~1% each.

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Struggling with a grounded jet problem

Southwest Airlines’ first-quarter performance may also be hurt by the high number of grounded jets in the last week. Citing FlightAware data, CNBC has reported that the company canceled as many as 100 flights on February 15, and 39 on February 16—more than any other air carrier. Usually, the company expects 20 planes to be out of service daily due to unforeseen maintenance issues.

CNBC reported that due to the high number of grounded jets on February 15, Southwest Airlines declared an “operational emergency” and issued a memo to its mechanics that “demanded they show up for work or risk termination,” according to CNBC. Reportedly, the notice was sent to employees at Southwest Airlines’ maintenance bases at Phoenix, Las Vegas, Orlando, and Houston, and it advised employees reporting illness that they must bring a doctor’s note when returning to work, or they may lose their jobs.

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