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Delta Air Lines, Inc. (DAL) - free report >>
United Airlines Holdings Inc (UAL) - free report >>
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Southwest Airlines Down on Dull View, Aircraft Delivery Delay
Southwest Airlines Co. (LUV - Free Report) recently announced a bleak outlook for the second quarter of 2016. The company now expects passenger revenue per available seat mile (PRASM) to rise by less than 1% this quarter. As per its earlier guidance, Southwest Airlines had expected a modest increase in this metric.
Shares of Southwest Airlines fell by 1.66% post this announcement.
The Zack Ranks #4 (Sell) stock also intends to delay the delivery from The Boeing Company of 67 new Boeing 737 Max jets by almost six years to manage capital spending. The planes, which were initially expected between 2019 and 2022, will now be delivered between 2023 and 2025. As a result, the company capital expenditure will be reduced by $1.9 billion.
At present, the company has 330 planes on order up till 2025. Being the fourth-largest airlines in the U.S, Southwest expects the number of aircrafts in it s fleet to reduce from 723 planes at the end of 2016 to 700 by 2017. The company would resume its fleet expansion plans after this period.
SOUTHWEST AIR Price
SOUTHWEST AIR Price | SOUTHWEST AIR Quote
Troubled times for Airline Industry
Airline industry stocks in general have been underperforming due to heightened concerns associated with terrorist attacks, low demand, and macroeconomic issues with Britain’s decision to leave the European Union – popularly termed Brexit. Nonetheless, Southwest Airlines enjoys a more positive performance outlook than its peers, such as American Airlines Group Inc. (AAL - Free Report) , Delta Air Lines, Inc. (DAL - Free Report) and United Continental Holdings, Inc. (UAL - Free Report) .
However, the delay in delivery of planes does raise concerns in the market that an overall muted demand in the industry might result in other airlines following the same path. As a result, shares of Boeing fell too after the Southwest announcement. Nonetheless, the stock retained value and inched up 1.4% by the time the market closed. Airlines have been enjoying higher margins due to low oil prices but average airfares have been falling and increasing concerns for investors.
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