Why Southwest Airlines Shares Are Falling Today

Southwest Airlines Company LUV shares are trading lower after the company lowered its outlook for second-quarter unit revenues.

The company anticipates a 4% to 4.5% decline in operating revenue per available seat mile (unit revenues), contrasting sharply with the previous expectation of a 1.5% to 3.5% decrease.

Southwest Airlines said in an exchange filing that the reduction was driven primarily by the complexities of adapting revenue management to current booking patterns in this dynamic environment.

However, despite lowered expectations, the company continues to expect an all-time quarterly record for operating revenue in the second quarter of 2024.

Southwest Airlines reiterated its outlook for economic fuel costs per gallon of $2.70 to $2.80.

“The company’s second quarter 2024 operational performance, thus far, continues to be strong with minimal cancellations,” the filing added.

Completion factor quarter-to-date has averaged approximately 99.5% despite challenging weather in Texas and Florida.

Southwest Airlines emphasized its pursuit of new revenue avenues to enhance profitability, aiming for returns on invested capital that exceed the company’s weighted average cost of capital.

The company was recently in the headlines for faceing pivotal decisions regarding its distinctive “bags fly free” policy as Elliott Investment Management, having recently acquired a $1.9 billion stake, advocates for strategic changes.

Related: Southwest Airlines’ Free Bag Policy Under Pressure After Elliott’s $1.9B Stake

The said policy allows passengers to check two bags free of charge, a unique offer among U.S. airlines.

The debate on whether to introduce fees for checked bags is intensifying, especially as the airline contemplates other modifications to its business model, such as assigned seating or premium services.

Price Action: LUV shares are trading lower by 3.16% to $27.61 premarket at last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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