Is This Texas-Based Company a Buy in Airline Stocks?

Core Viewpoint - The airline stock, particularly Southwest Airlines, has underperformed in 2025, but a significant turnaround plan could yield rewards for patient investors [1][2]. Company Performance - Southwest Airlines has experienced a double-digit year-to-date loss, with shares declining over a decade, losing more than a third of their value as earnings per share fell nearly 80% [2]. - Despite challenges like a government shutdown and tariff issues, Southwest achieved record third-quarter operating revenue of $6.9 billion and maintains a 2025 EBIT forecast of $600 million to $800 million [3]. Turnaround Strategy - CEO Bob Jordan describes the current transformation as "the most significant transformation" in the company's history, indicating that substantial changes are underway [4]. - Changes include charging for checked bags and assigning seats, which may concern frequent flyers but are part of a broader strategy to enhance customer experience [5]. - The transformation also includes the addition of four new domestic routes and a partnership with EVA Air to connect travelers to Asia [6]. Financial Outlook - The turnaround plan aims to add an estimated $4 billion in EBIT by 2027, although investor patience will be crucial [8]. - Southwest Airlines boasts a strong balance sheet, concluding the third quarter with $3 billion in cash and access to a $1.5 billion credit revolver, allowing for capital returns to shareholders totaling $439 million in the last quarter [9][10]. Cost Management - The company is upgrading its fleet to more fuel-efficient Boeing 737 MAX aircraft, which will help reduce operating expenses despite higher capital spending [12]. - Potential cash flow could be generated from selling older planes and leasing back some aircraft, providing upfront cash while incurring long-term lease liabilities [13].