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Southwest Airlines Stock: Bumpy Ride in 2019

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May. 16 2019, Published 8:19 a.m. ET

Bumpy ride

So far, Southwest Airlines (LUV) has struggled in 2019. The stock has underperformed the broader market returns. The stock’s YTD (year-to-date) return of 11.9% is lower than the NASDAQ and the S&P 500 Index’s gains of 17.9% and 13.7%, respectively.

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Southwest Airlines also underperformed the iShares Transportation Average’s (IYT) return, which has gained 14.3% YTD. The ETF tracks the performances of transportation stocks included in the Dow Jones Industrial Average. IYT has allocated 16.7% of its funds in the airline industry.

Continuous business disruptions made investors cautious about Southwest Airlines’ near-term performance. Since the beginning of 2019, Southwest Airlines’ business operations have been disrupted due to multiple factors. The company had 9,400 flight cancelations in the first quarter.

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On March 27, Southwest Airlines disclosed that among the 9,400 canceled flights, 3,800 were due to weather-related problems, 2,800 were due to unscheduled maintenance work, and 2,800 were due to the grounding of Boeing’s (BA) 737 MAX planes. Boeing’s MAX planes have been grounded globally due to two deadly crashes.

Business disruptions had a negative impact on Southwest Airlines’ first-quarter results. The company recorded an increase of 1.8% year-over-year in its first-quarter revenues—much lower than the mid-single-digit growth it registered in the previous four quarters.

Outperformed peers

Southwest Airlines stock’s YTD gain outpaced the returns of most of its peers in the airline industry. Delta Air Lines (DAL) and American Airlines (AAL) shares have risen 10.3% and 0.2%, respectively, YTD. United Airlines (UAL) has lost 1.6% of its market value during the same period.

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