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Southwest Airlines Stock Rises 8.34% on Tuesday's Trading: Here's How
LUVSouthwest Airlines(LUV) ZACKS·2025-03-12 20:00

Core Viewpoint - Southwest Airlines Co. (LUV) shares rose 8.34% to 30.53onMarch11,2025,drivenbystrategicgrowthplansandasharebuybackannouncement,despiteweakerdemandforecastsforQ12025[1]Group1:Q1Outlook−LUV′sfirst−quartercapacity(availableseatmiles)isexpectedtodeclineby230.53 on March 11, 2025, driven by strategic growth plans and a share buyback announcement, despite weaker demand forecasts for Q1 2025 [1] Group 1: Q1 Outlook - LUV's first-quarter capacity (available seat miles) is expected to decline by 2% year-over-year, an improvement from the previous guidance of a 2-3% decline [2] - Revenue per available seat mile (RASM) is anticipated to increase by 2-4% year-over-year, down from a prior forecast of 5-7%, due to softer bookings and macroeconomic uncertainties [3] - Economic fuel cost per gallon is now expected to be between 2.35 and 2.45,adecreasefromthepreviousrangeof2.45, a decrease from the previous range of 2.50 to 2.60,whichshouldpositivelyimpactthebottomline[4]−Consolidatedunitcost(CASM),excludingfuel,isexpectedtoriseby62.60, which should positively impact the bottom line [4] - Consolidated unit cost (CASM), excluding fuel, is expected to rise by 6% year-over-year, a reduction from the prior estimate of 7-9% growth, attributed to increased capacity and lower-than-expected expenses [5] - Interest expenses are projected to remain at 45 million for the first quarter [6] Group 2: Strategic Growth Plans - LUV has completed 1billioninsharerepurchasesfroma1 billion in share repurchases from a 2.5 billion program and plans to finish the remaining 1.5billionbyJuly2025[7]−Thecompanyisfocusingonrevenuemanagementactions,includingnetworkoptimizationandmarketingevolution,withinitiativeslikeassignedseatingandpartnershipswithChaseandIcelandair[8]−AnupdatedbagfeepolicywilltakeeffectonMay28,2025,maintainingfreecheckedbagsforcertainmemberswhileintroducingfeesforothers[9]−LUVaimstodoubleits2027costreductiontargettoexceed1.5 billion by July 2025 [7] - The company is focusing on revenue management actions, including network optimization and marketing evolution, with initiatives like assigned seating and partnerships with Chase and Icelandair [8] - An updated bag fee policy will take effect on May 28, 2025, maintaining free checked bags for certain members while introducing fees for others [9] - LUV aims to double its 2027 cost reduction target to exceed 1 billion and will discontinue its fuel hedging program [10] - The CEO expressed optimism about meeting customer needs and returning to expected profitability levels [11] Group 3: Industry Context - Other airlines, including Delta Air Lines, American Airlines, and JetBlue Airways, have also revised their Q1 2025 guidance, citing economic uncertainties and reduced travel demand [12] - Delta has lowered its adjusted EPS guidance to 30-50 cents from 70 cents-$1, with total revenue growth expectations also reduced [13][14] - American Airlines now anticipates a loss per share of 60-80 cents, down from a prior expected loss of 20-40 cents, with total revenues expected to be flat year-over-year [16] - JetBlue expects a capacity decline of 4-5% and mixed RASM forecasts, reflecting broader industry challenges [19][20]