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Here's Why Southwest Declines 2.3% in Yesterday's Trading

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Shares of Southwest Airlines (LUV - Free Report) dipped 2.3% at the close of business on Mar 12 following worldwide groundings of the 737 Max aircraft. This mass-scale grounding was in response to the crash of an Ethiopian Airlines Boeing 737 MAX 8 aircraft. The fatal incident caused the death of 157 passengers, marking the second crash since last October on the same aircraft.

Despite the incident, this Zacks Rank #3 (Hold) company has decided to continue functioning the aircraft. Management stated that its fleet data did not show any warning signs. The airline is anticipated to utilize the 737 MAX on 8.8% of its capacity this year.

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Unlike its nationwide counterparts, this U.S. aviation regulator is not yet looking to ground the aircraft as “no systemic performance issues” were detected and there is “no basis to order grounding the aircraft”.
 
However, market watchers believe, in the event of the U.S. Federal Aviation Administration’s order to ground the aircraft, Southwest will not find it difficult to cope by adjusting its flight schedules and resorting to other aircraft.

Apart from Southwest, other U.S. carriers with exposure to the 737 MAX model suffered the blow. Shares of American Airlines Group (AAL - Free Report) , United Continental Holdings (UAL - Free Report) and Alaska Air Group (ALK - Free Report) slipped 3.5%, 3.1% and 2.4%, respectively, at yesterday’s close.

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